Correlation Between American West and Rea
Can any of the company-specific risk be diversified away by investing in both American West and Rea 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 American West and Rea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American West Metals and Rea Group, you can compare the effects of market volatilities on American West and Rea 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 American West with a short position of Rea. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and Rea.
Diversification Opportunities for American West and Rea
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Rea is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding American West Metals and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea Group and American West 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 American West Metals are associated (or correlated) with Rea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of American West i.e., American West and Rea go up and down completely randomly.
Pair Corralation between American West and Rea
Assuming the 90 days trading horizon American West Metals is expected to under-perform the Rea. In addition to that, American West is 3.87 times more volatile than Rea Group. It trades about -0.01 of its total potential returns per unit of risk. Rea Group is currently generating about 0.1 per unit of volatility. If you would invest 16,264 in Rea Group on September 4, 2024 and sell it today you would earn a total of 8,740 from holding Rea Group or generate 53.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American West Metals vs. Rea Group
Performance |
| Timeline |
| American West Metals |
| Rea Group |
American West and Rea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and Rea
The main advantage of trading using opposite American West and Rea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West position performs unexpectedly, Rea 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 Rea will offset losses from the drop in Rea's long position.| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Sandfire Resources NL |
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 CEOs Directory module to screen CEOs from public companies around the world.
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