Correlation Between Western Sierra and Green Cures

Can any of the company-specific risk be diversified away by investing in both Western Sierra and Green Cures 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 Sierra and Green Cures into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Sierra Mining and Green Cures Botanical, you can compare the effects of market volatilities on Western Sierra and Green Cures 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 Sierra with a short position of Green Cures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and Green Cures.

Diversification Opportunities for Western Sierra and Green Cures

0.27

Correlation Coefficient

Western Sierra  Green Cures

Modest diversification

The 3 months correlation between Western and Green is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical and Western Sierra 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 Sierra Mining are associated (or correlated) with Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of Western Sierra i.e., Western Sierra and Green Cures go up and down completely randomly.

Pair Corralation between Western Sierra and Green Cures

Given the investment horizon of 90 days Western Sierra Mining is expected to generate 2.75 times more return on investment than Green Cures. However, Western Sierra is 2.75 times more volatile than Green Cures Botanical. It trades about 0.11 of its potential returns per unit of risk. Green Cures Botanical is currently generating about 0.19 per unit of risk. If you would invest  0.35  in Western Sierra Mining on December 29, 2024 and sell it today you would lose (0.33) from holding Western Sierra Mining or give up 94.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Western Sierra Mining  vs.  Green Cures Botanical

Western Sierra Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Sierra Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Western Sierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Green Cures Botanical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Sierra and Green Cures

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

The idea behind Western Sierra Mining and Green Cures Botanical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.