Correlation Between Westwater Resources and Northern Graphite

Can any of the company-specific risk be diversified away by investing in both Westwater Resources and Northern Graphite 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 Westwater Resources and Northern Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Westwater Resources and Northern Graphite

0.42

Correlation Coefficient

Westwater Resources  Northern Graphite

Very weak diversification

The 3 months correlation between Westwater and Northern is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Westwater Resources and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite and Westwater Resources 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 Westwater Resources are associated (or correlated) with Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of Westwater Resources i.e., Westwater Resources and Northern Graphite go up and down completely randomly.

Pair Corralation between Westwater Resources and Northern Graphite

Considering the 90-day investment horizon Westwater Resources is expected to generate 0.62 times more return on investment than Northern Graphite. However, Westwater Resources is 1.62 times less risky than Northern Graphite. It trades about 0.01 of its potential returns per unit of risk. Northern Graphite is currently generating about -0.01 per unit of risk. If you would invest  106.00  in Westwater Resources on October 7, 2024 and sell it today you would lose (25.00) from holding Westwater Resources or give up 23.58% of portfolio value over 90 days.

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

Westwater Resources  vs.  Northern Graphite

Westwater Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwater Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Westwater Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Northern Graphite

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Graphite are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Northern Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westwater Resources and Northern Graphite

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

The idea behind Westwater Resources and Northern Graphite 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.