Correlation Between Western Sierra and Paiute Oil

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

Diversification Opportunities for Western Sierra and Paiute Oil

0.0

Correlation Coefficient

Western Sierra  Paiute Oil

Pay attention - limited upside

The 3 months correlation between Western and Paiute is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and Paiute Oil Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paiute Oil Mining 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 Paiute Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paiute Oil Mining has no effect on the direction of Western Sierra i.e., Western Sierra and Paiute Oil go up and down completely randomly.

Pair Corralation between Western Sierra and Paiute Oil

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	Flat
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Western Sierra Mining  vs.  Paiute Oil Mining

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.

Paiute Oil Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paiute Oil Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Paiute Oil is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Western Sierra and Paiute Oil

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

The idea behind Western Sierra Mining and Paiute Oil Mining 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.