Correlation Between Western Copper and Big 5

Can any of the company-specific risk be diversified away by investing in both Western Copper and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on Western Copper and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Big 5.

Diversification Opportunities for Western Copper and Big 5

0.33

Correlation Coefficient

Western Copper  Big 5

Weak diversification

The 3 months correlation between Western and Big is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Western Copper i.e., Western Copper and Big 5 go up and down completely randomly.

Pair Corralation between Western Copper and Big 5

Assuming the 90 days trading horizon Western Copper and is expected to generate 0.82 times more return on investment than Big 5. However, Western Copper and is 1.22 times less risky than Big 5. It trades about 0.01 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.01 per unit of risk. If you would invest  102.00  in Western Copper and on September 12, 2024 and sell it today you would lose (1.00) from holding Western Copper and or give up 0.98% of portfolio value over 90 days.

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

Western Copper and  vs.  Big 5 Sporting

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. Despite nearly stable basic indicators, Western Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Copper and Big 5

The main advantage of trading using opposite Western Copper and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Western Copper and and Big 5 Sporting 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.