Correlation Between Williams Sonoma and Jiangxi Copper

Can any of the company-specific risk be diversified away by investing in both Williams Sonoma and Jiangxi Copper 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 Williams Sonoma and Jiangxi Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Williams Sonoma and Jiangxi Copper, you can compare the effects of market volatilities on Williams Sonoma and Jiangxi Copper 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 Williams Sonoma with a short position of Jiangxi Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Williams Sonoma and Jiangxi Copper.

Diversification Opportunities for Williams Sonoma and Jiangxi Copper

-0.48

Correlation Coefficient

Williams Sonoma  Jiangxi Copper

Very good diversification

The 3 months correlation between Williams and Jiangxi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma and Jiangxi Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Copper and Williams Sonoma 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 Williams Sonoma are associated (or correlated) with Jiangxi Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Copper has no effect on the direction of Williams Sonoma i.e., Williams Sonoma and Jiangxi Copper go up and down completely randomly.

Pair Corralation between Williams Sonoma and Jiangxi Copper

Considering the 90-day investment horizon Williams Sonoma is expected to generate 0.39 times more return on investment than Jiangxi Copper. However, Williams Sonoma is 2.57 times less risky than Jiangxi Copper. It trades about 0.13 of its potential returns per unit of risk. Jiangxi Copper is currently generating about 0.01 per unit of risk. If you would invest  17,249  in Williams Sonoma on September 22, 2024 and sell it today you would earn a total of  1,119  from holding Williams Sonoma or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Williams Sonoma  vs.  Jiangxi Copper

Williams Sonoma

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Copper

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Copper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Jiangxi Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Williams Sonoma and Jiangxi Copper

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

The idea behind Williams Sonoma and Jiangxi Copper 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.