Correlation Between ButOne Information and Western Mining

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

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

Diversification Opportunities for ButOne Information and Western Mining

0.75

Correlation Coefficient

ButOne Information  Western Mining

Poor diversification

The 3 months correlation between ButOne and Western is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ButOne Information Corp and Western Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Mining and ButOne Information 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 ButOne Information Corp are associated (or correlated) with Western Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Mining has no effect on the direction of ButOne Information i.e., ButOne Information and Western Mining go up and down completely randomly.

Pair Corralation between ButOne Information and Western Mining

Assuming the 90 days trading horizon ButOne Information Corp is expected to generate 1.57 times more return on investment than Western Mining. However, ButOne Information is 1.57 times more volatile than Western Mining Co. It trades about 0.21 of its potential returns per unit of risk. Western Mining Co is currently generating about 0.1 per unit of risk. If you would invest  1,599  in ButOne Information Corp on September 4, 2024 and sell it today you would earn a total of  827.00  from holding ButOne Information Corp or generate 51.72% return on investment over 90 days.

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

ButOne Information Corp  vs.  Western Mining Co

ButOne Information Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ButOne Information Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ButOne Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Western Mining

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Mining Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ButOne Information and Western Mining

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

The idea behind ButOne Information Corp and Western Mining Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.