Correlation Between Covalon Technologies and Westaim Corp
Can any of the company-specific risk be diversified away by investing in both Covalon Technologies and Westaim Corp 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 Covalon Technologies and Westaim Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Covalon Technologies and Westaim Corp, you can compare the effects of market volatilities on Covalon Technologies and Westaim Corp 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 Covalon Technologies with a short position of Westaim Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Covalon Technologies and Westaim Corp.
Diversification Opportunities for Covalon Technologies and Westaim Corp
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Covalon and Westaim is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Covalon Technologies and Westaim Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westaim Corp and Covalon Technologies 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 Covalon Technologies are associated (or correlated) with Westaim Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westaim Corp has no effect on the direction of Covalon Technologies i.e., Covalon Technologies and Westaim Corp go up and down completely randomly.
Pair Corralation between Covalon Technologies and Westaim Corp
Assuming the 90 days horizon Covalon Technologies is expected to generate 3.71 times more return on investment than Westaim Corp. However, Covalon Technologies is 3.71 times more volatile than Westaim Corp. It trades about 0.09 of its potential returns per unit of risk. Westaim Corp is currently generating about 0.07 per unit of risk. If you would invest 344.00 in Covalon Technologies on September 3, 2024 and sell it today you would earn a total of 21.00 from holding Covalon Technologies or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Covalon Technologies vs. Westaim Corp
Performance |
| Timeline |
| Covalon Technologies |
| Westaim Corp |
Covalon Technologies and Westaim Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Covalon Technologies and Westaim Corp
The main advantage of trading using opposite Covalon Technologies and Westaim Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Covalon Technologies position performs unexpectedly, Westaim Corp 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 Westaim Corp will offset losses from the drop in Westaim Corp's long position.| Covalon Technologies vs. Westaim Corp | Covalon Technologies vs. Pulse Seismic | Covalon Technologies vs. Quarterhill | Covalon Technologies vs. TECSYS Inc |
| Westaim Corp vs. Pulse Seismic | Westaim Corp vs. Quarterhill | Westaim Corp vs. Kneat Inc | Westaim Corp vs. Trisura Group |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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