Correlation Between Wam Leaders and Wam Capital

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

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

Diversification Opportunities for Wam Leaders and Wam Capital

0.32

Correlation Coefficient

Wam Leaders  Wam Capital

Weak diversification

The 3 months correlation between Wam and Wam is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wam Leaders and Wam Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Capital and Wam Leaders 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 Wam Leaders are associated (or correlated) with Wam Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Capital has no effect on the direction of Wam Leaders i.e., Wam Leaders and Wam Capital go up and down completely randomly.

Pair Corralation between Wam Leaders and Wam Capital

Assuming the 90 days trading horizon Wam Leaders is expected to under-perform the Wam Capital. In addition to that, Wam Leaders is 1.5 times more volatile than Wam Capital. It trades about -0.03 of its total potential returns per unit of risk. Wam Capital is currently generating about -0.03 per unit of volatility. If you would invest  152.00  in Wam Capital on August 31, 2024 and sell it today you would lose (2.00) from holding Wam Capital or give up 1.32% of portfolio value over 90 days.

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

Wam Leaders  vs.  Wam Capital

Wam Leaders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wam Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Wam Leaders is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Wam Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wam Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Wam Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wam Leaders and Wam Capital

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

The idea behind Wam Leaders and Wam Capital 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.