Correlation Between Postmedia Network and Western Resources
Can any of the company-specific risk be diversified away by investing in both Postmedia Network and Western Resources 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 Resources 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 Resources Corp, you can compare the effects of market volatilities on Postmedia Network and Western Resources 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 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postmedia Network and Western Resources.
Diversification Opportunities for Postmedia Network and Western Resources
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Postmedia and Western is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and Western Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Resources Corp 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 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Resources Corp has no effect on the direction of Postmedia Network i.e., Postmedia Network and Western Resources go up and down completely randomly.
Pair Corralation between Postmedia Network and Western Resources
Assuming the 90 days trading horizon Postmedia Network Canada is expected to under-perform the Western Resources. But the stock apears to be less risky and, when comparing its historical volatility, Postmedia Network Canada is 7.05 times less risky than Western Resources. The stock trades about -0.35 of its potential returns per unit of risk. The Western Resources Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Western Resources Corp on November 28, 2024 and sell it today you would earn a total of 0.50 from holding Western Resources Corp or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Postmedia Network Canada vs. Western Resources Corp
Performance |
| Timeline |
| Postmedia Network Canada |
| Western Resources Corp |
Postmedia Network and Western Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Postmedia Network and Western Resources
The main advantage of trading using opposite Postmedia Network and Western Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postmedia Network position performs unexpectedly, Western Resources 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 Resources will offset losses from the drop in Western Resources' long position.| Postmedia Network vs. Westshore Terminals Investment | Postmedia Network vs. Western Investment | Postmedia Network vs. Partners Value Investments | Postmedia Network vs. Canadian General Investments |
| Western Resources vs. Gensource Potash | Western Resources vs. Century Global Commodities | Western Resources vs. Xtra Gold Resources Corp | Western Resources vs. Loncor Resources |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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