Correlation Between Equity Metals and Western Alaska

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

By analyzing existing cross correlation between Equity Metals and Western Alaska Minerals, you can compare the effects of market volatilities on Equity Metals and Western Alaska 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 Equity Metals with a short position of Western Alaska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Metals and Western Alaska.

Diversification Opportunities for Equity Metals and Western Alaska

0.66

Correlation Coefficient

Equity Metals  Western Alaska

Poor diversification

The 3 months correlation between Equity and Western is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Equity Metals and Western Alaska Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alaska Minerals and Equity Metals 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 Equity Metals are associated (or correlated) with Western Alaska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alaska Minerals has no effect on the direction of Equity Metals i.e., Equity Metals and Western Alaska go up and down completely randomly.

Pair Corralation between Equity Metals and Western Alaska

Assuming the 90 days horizon Equity Metals is expected to generate 1.01 times more return on investment than Western Alaska. However, Equity Metals is 1.01 times more volatile than Western Alaska Minerals. It trades about 0.02 of its potential returns per unit of risk. Western Alaska Minerals is currently generating about -0.01 per unit of risk. If you would invest  14.00  in Equity Metals on September 2, 2024 and sell it today you would lose (1.00) from holding Equity Metals or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Equity Metals  vs.  Western Alaska Minerals

Equity Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Equity Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Alaska Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Equity Metals and Western Alaska

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

The idea behind Equity Metals and Western Alaska Minerals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.