Correlation Between InPlay Oil and Westwater Resources
Can any of the company-specific risk be diversified away by investing in both InPlay Oil and Westwater Resources 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 InPlay Oil and Westwater Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InPlay Oil Corp and Westwater Resources, you can compare the effects of market volatilities on InPlay Oil and Westwater Resources 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 InPlay Oil with a short position of Westwater Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Westwater Resources.
Diversification Opportunities for InPlay Oil and Westwater Resources
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between InPlay and Westwater is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Westwater Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwater Resources and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Westwater Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwater Resources has no effect on the direction of InPlay Oil i.e., InPlay Oil and Westwater Resources go up and down completely randomly.
Pair Corralation between InPlay Oil and Westwater Resources
Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 0.5 times more return on investment than Westwater Resources. However, InPlay Oil Corp is 1.99 times less risky than Westwater Resources. It trades about -0.25 of its potential returns per unit of risk. Westwater Resources is currently generating about -0.14 per unit of risk. If you would invest 127.00 in InPlay Oil Corp on September 25, 2024 and sell it today you would lose (25.00) from holding InPlay Oil Corp or give up 19.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
InPlay Oil Corp vs. Westwater Resources
Performance |
| Timeline |
| InPlay Oil Corp |
| Westwater Resources |
InPlay Oil and Westwater Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InPlay Oil and Westwater Resources
The main advantage of trading using opposite InPlay Oil and Westwater Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil position performs unexpectedly, Westwater Resources 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 Westwater Resources will offset losses from the drop in Westwater Resources' long position.The idea behind InPlay Oil Corp and Westwater Resources 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.| Westwater Resources vs. Columbia Sportswear | Westwater Resources vs. InPlay Oil Corp | Westwater Resources vs. Playtech plc | Westwater Resources vs. Pentair plc |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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