Correlation Between Teck Resources and Western Copper
Can any of the company-specific risk be diversified away by investing in both Teck Resources and Western Copper 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 Teck Resources and Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teck Resources Ltd and Western Copper and, you can compare the effects of market volatilities on Teck Resources and Western Copper 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 Teck Resources with a short position of Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Western Copper.
Diversification Opportunities for Teck Resources and Western Copper
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Teck and Western is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper and Teck Resources 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 Teck Resources Ltd are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Teck Resources i.e., Teck Resources and Western Copper go up and down completely randomly.
Pair Corralation between Teck Resources and Western Copper
Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 0.81 times more return on investment than Western Copper. However, Teck Resources Ltd is 1.23 times less risky than Western Copper. It trades about -0.03 of its potential returns per unit of risk. Western Copper and is currently generating about -0.03 per unit of risk. If you would invest 5,143 in Teck Resources Ltd on August 29, 2024 and sell it today you would lose (519.00) from holding Teck Resources Ltd or give up 10.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Ltd vs. Western Copper and
Performance |
| Timeline |
| Teck Resources |
| Western Copper |
Teck Resources and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Western Copper
The main advantage of trading using opposite Teck Resources and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources position performs unexpectedly, Western Copper 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 Copper will offset losses from the drop in Western Copper's long position.| Teck Resources vs. Rio Tinto ADR | Teck Resources vs. Vale SA ADR | Teck Resources vs. MP Materials Corp | Teck Resources vs. Lithium Americas Corp |
| Western Copper vs. Lithium Americas Corp | Western Copper vs. Caterpillar | Western Copper vs. Exxon Mobil Corp | Western Copper vs. Cisco Systems |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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