Correlation Between Western Copper and Park Electrochemical

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

Diversification Opportunities for Western Copper and Park Electrochemical

-0.36

Correlation Coefficient

Western Copper  Park Electrochemical

Very good diversification

The 3 months correlation between Western and Park is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical 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 Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of Western Copper i.e., Western Copper and Park Electrochemical go up and down completely randomly.

Pair Corralation between Western Copper and Park Electrochemical

Considering the 90-day investment horizon Western Copper and is expected to under-perform the Park Electrochemical. In addition to that, Western Copper is 1.28 times more volatile than Park Electrochemical. It trades about -0.05 of its total potential returns per unit of risk. Park Electrochemical is currently generating about 0.06 per unit of volatility. If you would invest  1,336  in Park Electrochemical on October 9, 2024 and sell it today you would earn a total of  96.00  from holding Park Electrochemical or generate 7.19% 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.  Park Electrochemical

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Park Electrochemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Park Electrochemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Western Copper and Park Electrochemical

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

The idea behind Western Copper and and Park Electrochemical 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.