Correlation Between Eagle Mountain and American West
Can any of the company-specific risk be diversified away by investing in both Eagle Mountain and American West 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 Eagle Mountain and American West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Mountain Mining and American West Metals, you can compare the effects of market volatilities on Eagle Mountain and American West 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 Eagle Mountain with a short position of American West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Mountain and American West.
Diversification Opportunities for Eagle Mountain and American West
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eagle and American is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Mountain Mining and American West Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American West Metals and Eagle Mountain 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 Eagle Mountain Mining are associated (or correlated) with American West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American West Metals has no effect on the direction of Eagle Mountain i.e., Eagle Mountain and American West go up and down completely randomly.
Pair Corralation between Eagle Mountain and American West
Assuming the 90 days trading horizon Eagle Mountain Mining is expected to under-perform the American West. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Mountain Mining is 1.24 times less risky than American West. The stock trades about -0.06 of its potential returns per unit of risk. The American West Metals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 16.00 in American West Metals on August 28, 2024 and sell it today you would lose (9.60) from holding American West Metals or give up 60.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Mountain Mining vs. American West Metals
Performance |
| Timeline |
| Eagle Mountain Mining |
| American West Metals |
Eagle Mountain and American West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Mountain and American West
The main advantage of trading using opposite Eagle Mountain and American West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Mountain position performs unexpectedly, American West 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 American West will offset losses from the drop in American West's long position.| Eagle Mountain vs. Northern Star Resources | Eagle Mountain vs. Evolution Mining | Eagle Mountain vs. Bluescope Steel | Eagle Mountain vs. Sandfire Resources NL |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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