Correlation Between Western Investment and Rover Metals

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

By analyzing existing cross correlation between Western Investment and Rover Metals Corp, you can compare the effects of market volatilities on Western Investment and Rover Metals 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 Rover Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Investment and Rover Metals.

Diversification Opportunities for Western Investment and Rover Metals

-0.46

Correlation Coefficient

Western Investment  Rover Metals

Very good diversification

The 3 months correlation between Western and Rover is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Rover Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rover Metals Corp 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 Rover Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rover Metals Corp has no effect on the direction of Western Investment i.e., Western Investment and Rover Metals go up and down completely randomly.

Pair Corralation between Western Investment and Rover Metals

Given the investment horizon of 90 days Western Investment is expected to generate 1.67 times less return on investment than Rover Metals. But when comparing it to its historical volatility, Western Investment is 3.29 times less risky than Rover Metals. It trades about 0.04 of its potential returns per unit of risk. Rover Metals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Rover Metals Corp on September 26, 2024 and sell it today you would lose (3.50) from holding Rover Metals Corp or give up 77.78% of portfolio value over 90 days.

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

Western Investment  vs.  Rover Metals Corp

Western Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Rover Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rover Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Western Investment and Rover Metals

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

The idea behind Western Investment and Rover Metals Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.