Correlation Between Western Copper and Northern Dynasty

Can any of the company-specific risk be diversified away by investing in both Western Copper and Northern Dynasty 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 Northern Dynasty 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 Northern Dynasty Minerals, you can compare the effects of market volatilities on Western Copper and Northern Dynasty 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 Northern Dynasty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Northern Dynasty.

Diversification Opportunities for Western Copper and Northern Dynasty

-0.31

Correlation Coefficient

Western Copper  Northern Dynasty

Very good diversification

The 3 months correlation between Western and Northern is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Northern Dynasty Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Dynasty Minerals 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 Northern Dynasty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Dynasty Minerals has no effect on the direction of Western Copper i.e., Western Copper and Northern Dynasty go up and down completely randomly.

Pair Corralation between Western Copper and Northern Dynasty

Considering the 90-day investment horizon Western Copper and is expected to under-perform the Northern Dynasty. But the stock apears to be less risky and, when comparing its historical volatility, Western Copper and is 1.62 times less risky than Northern Dynasty. The stock trades about -0.03 of its potential returns per unit of risk. The Northern Dynasty Minerals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Northern Dynasty Minerals on August 30, 2024 and sell it today you would earn a total of  14.00  from holding Northern Dynasty Minerals or generate 46.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Western Copper and  vs.  Northern Dynasty Minerals

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 very healthy basic indicators, Western Copper is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Northern Dynasty Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Dynasty Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Northern Dynasty disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Copper and Northern Dynasty

The main advantage of trading using opposite Western Copper and Northern Dynasty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, Northern Dynasty 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 Northern Dynasty will offset losses from the drop in Northern Dynasty's long position.

The idea behind Western Copper and and Northern Dynasty Minerals 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.