Correlation Between Alaska Energy and Westport Fuel
Can any of the company-specific risk be diversified away by investing in both Alaska Energy and Westport Fuel 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 Alaska Energy and Westport Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Energy Metals and Westport Fuel Systems, you can compare the effects of market volatilities on Alaska Energy and Westport Fuel 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 Alaska Energy with a short position of Westport Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Energy and Westport Fuel.
Diversification Opportunities for Alaska Energy and Westport Fuel
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alaska and Westport is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Energy Metals and Westport Fuel Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westport Fuel Systems and Alaska Energy 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 Alaska Energy Metals are associated (or correlated) with Westport Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westport Fuel Systems has no effect on the direction of Alaska Energy i.e., Alaska Energy and Westport Fuel go up and down completely randomly.
Pair Corralation between Alaska Energy and Westport Fuel
Assuming the 90 days trading horizon Alaska Energy Metals is expected to generate 2.23 times more return on investment than Westport Fuel. However, Alaska Energy is 2.23 times more volatile than Westport Fuel Systems. It trades about 0.01 of its potential returns per unit of risk. Westport Fuel Systems is currently generating about -0.02 per unit of risk. If you would invest 40.00 in Alaska Energy Metals on August 29, 2024 and sell it today you would lose (27.00) from holding Alaska Energy Metals or give up 67.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Energy Metals vs. Westport Fuel Systems
Performance |
| Timeline |
| Alaska Energy Metals |
| Westport Fuel Systems |
Alaska Energy and Westport Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Energy and Westport Fuel
The main advantage of trading using opposite Alaska Energy and Westport Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Energy position performs unexpectedly, Westport Fuel 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 Westport Fuel will offset losses from the drop in Westport Fuel's long position.| Alaska Energy vs. First Majestic Silver | Alaska Energy vs. Ivanhoe Energy | Alaska Energy vs. Orezone Gold Corp | Alaska Energy vs. Faraday Copper Corp |
| Westport Fuel vs. Eros Resources Corp | Westport Fuel vs. Apple Inc CDR | Westport Fuel vs. European Residential Real | Westport Fuel vs. Canadian Utilities Ltd |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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