Correlation Between Postmedia Network and Western Investment
Can any of the company-specific risk be diversified away by investing in both Postmedia Network and Western Investment 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 Postmedia Network and Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Postmedia Network Canada and Western Investment, you can compare the effects of market volatilities on Postmedia Network and Western Investment 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 Postmedia Network with a short position of Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postmedia Network and Western Investment.
Diversification Opportunities for Postmedia Network and Western Investment
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Postmedia and Western is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Postmedia Network 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 Postmedia Network Canada are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Postmedia Network i.e., Postmedia Network and Western Investment go up and down completely randomly.
Pair Corralation between Postmedia Network and Western Investment
Assuming the 90 days trading horizon Postmedia Network Canada is expected to under-perform the Western Investment. But the stock apears to be less risky and, when comparing its historical volatility, Postmedia Network Canada is 1.17 times less risky than Western Investment. The stock trades about -0.01 of its potential returns per unit of risk. The Western Investment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Western Investment on September 20, 2024 and sell it today you would earn a total of 6.00 from holding Western Investment or generate 13.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Postmedia Network Canada vs. Western Investment
Performance |
| Timeline |
| Postmedia Network Canada |
| Western Investment |
Postmedia Network and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Postmedia Network and Western Investment
The main advantage of trading using opposite Postmedia Network and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postmedia Network position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| Postmedia Network vs. Genesis Land Development | Postmedia Network vs. Madison Pacific Properties | Postmedia Network vs. Goodfellow | Postmedia Network vs. Helix BioPharma Corp |
| Western Investment vs. NeXGold Mining Corp | Western Investment vs. Marimaca Copper Corp | Western Investment vs. Computer Modelling Group | Western Investment vs. Cogeco Communications |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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