Correlation Between Western Sierra and Transocean

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

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

Diversification Opportunities for Western Sierra and Transocean

0.4

Correlation Coefficient

Western Sierra  Transocean

Very weak diversification

The 3 months correlation between Western and Transocean is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Western Sierra 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 Sierra Mining are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Western Sierra i.e., Western Sierra and Transocean go up and down completely randomly.

Pair Corralation between Western Sierra and Transocean

Given the investment horizon of 90 days Western Sierra Mining is expected to under-perform the Transocean. In addition to that, Western Sierra is 4.05 times more volatile than Transocean. It trades about -0.46 of its total potential returns per unit of risk. Transocean is currently generating about -0.07 per unit of volatility. If you would invest  429.00  in Transocean on September 13, 2024 and sell it today you would lose (20.00) from holding Transocean or give up 4.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Western Sierra Mining  vs.  Transocean

Western Sierra Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Sierra Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Sierra and Transocean

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

The idea behind Western Sierra Mining and Transocean 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.