Correlation Between Western Investment and High Liner

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

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

Diversification Opportunities for Western Investment and High Liner

0.52

Correlation Coefficient

Western Investment  High Liner

Very weak diversification

The 3 months correlation between Western and High is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and High Liner Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Liner Foods and Western Investment 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 Investment are associated (or correlated) with High Liner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Liner Foods has no effect on the direction of Western Investment i.e., Western Investment and High Liner go up and down completely randomly.

Pair Corralation between Western Investment and High Liner

Given the investment horizon of 90 days Western Investment is expected to generate 2.05 times more return on investment than High Liner. However, Western Investment is 2.05 times more volatile than High Liner Foods. It trades about 0.49 of its potential returns per unit of risk. High Liner Foods is currently generating about 0.14 per unit of risk. If you would invest  44.00  in Western Investment on October 1, 2024 and sell it today you would earn a total of  11.00  from holding Western Investment or generate 25.0% return on investment over 90 days.

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

Western Investment  vs.  High Liner Foods

Western Investment

Risk-Adjusted Performance

7 of 100

OK

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

High Liner Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, High Liner displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and High Liner

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

The idea behind Western Investment and High Liner Foods 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.