Correlation Between Alternative Investment and West African
Can any of the company-specific risk be diversified away by investing in both Alternative Investment and West African 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 Alternative Investment and West African into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alternative Investment Trust and West African Resources, you can compare the effects of market volatilities on Alternative Investment and West African 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 Alternative Investment with a short position of West African. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Investment and West African.
Diversification Opportunities for Alternative Investment and West African
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alternative and West is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Investment Trust and West African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West African Resources and Alternative 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 Alternative Investment Trust are associated (or correlated) with West African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West African Resources has no effect on the direction of Alternative Investment i.e., Alternative Investment and West African go up and down completely randomly.
Pair Corralation between Alternative Investment and West African
Assuming the 90 days trading horizon Alternative Investment is expected to generate 4.24 times less return on investment than West African. But when comparing it to its historical volatility, Alternative Investment Trust is 2.38 times less risky than West African. It trades about 0.03 of its potential returns per unit of risk. West African Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 94.00 in West African Resources on November 29, 2024 and sell it today you would earn a total of 82.00 from holding West African Resources or generate 87.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Alternative Investment Trust vs. West African Resources
Performance |
| Timeline |
| Alternative Investment |
| West African Resources |
Alternative Investment and West African Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alternative Investment and West African
The main advantage of trading using opposite Alternative Investment and West African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Investment position performs unexpectedly, West African 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 West African will offset losses from the drop in West African's long position.The idea behind Alternative Investment Trust and West African 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.
| West African vs. Flagship Investments | West African vs. Navigator Global Investments | West African vs. Arc Funds | West African vs. Iron Road |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |