Correlation Between Western Copper and Knife River

Can any of the company-specific risk be diversified away by investing in both Western Copper and Knife River at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Western Copper and Knife River into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Copper and and Knife River, you can compare the effects of market volatilities on Western Copper and Knife River and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Western Copper with a short position of Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Knife River.

Diversification Opportunities for Western Copper and Knife River

-0.76

Correlation Coefficient

Western Copper  Knife River

Pay attention - limited upside

The 3 months correlation between Western and Knife is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and Western Copper is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Western Copper and are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Western Copper i.e., Western Copper and Knife River go up and down completely randomly.

Pair Corralation between Western Copper and Knife River

Considering the 90-day investment horizon Western Copper and is expected to under-perform the Knife River. In addition to that, Western Copper is 1.32 times more volatile than Knife River. It trades about -0.02 of its total potential returns per unit of risk. Knife River is currently generating about 0.13 per unit of volatility. If you would invest  3,551  in Knife River on September 20, 2024 and sell it today you would earn a total of  6,452  from holding Knife River or generate 181.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	79.44%
Values	Daily Returns

Western Copper and  vs.  Knife River

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Knife River

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Knife River may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Copper and Knife River

The main advantage of trading using opposite Western Copper and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, Knife River can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Knife River will offset losses from the drop in Knife River's long position.

The idea behind Western Copper and and Knife River pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.