Correlation Between Western Alaska and Sierra Madre
Can any of the company-specific risk be diversified away by investing in both Western Alaska and Sierra Madre 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 Western Alaska and Sierra Madre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Alaska Minerals and Sierra Madre Gold, you can compare the effects of market volatilities on Western Alaska and Sierra Madre 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 Western Alaska with a short position of Sierra Madre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alaska and Sierra Madre.
Diversification Opportunities for Western Alaska and Sierra Madre
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Sierra is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Western Alaska Minerals and Sierra Madre Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Madre Gold and Western Alaska 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 Western Alaska Minerals are associated (or correlated) with Sierra Madre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Madre Gold has no effect on the direction of Western Alaska i.e., Western Alaska and Sierra Madre go up and down completely randomly.
Pair Corralation between Western Alaska and Sierra Madre
Assuming the 90 days horizon Western Alaska Minerals is expected to generate 1.23 times more return on investment than Sierra Madre. However, Western Alaska is 1.23 times more volatile than Sierra Madre Gold. It trades about -0.14 of its potential returns per unit of risk. Sierra Madre Gold is currently generating about -0.27 per unit of risk. If you would invest 56.00 in Western Alaska Minerals on August 30, 2024 and sell it today you would lose (13.00) from holding Western Alaska Minerals or give up 23.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Alaska Minerals vs. Sierra Madre Gold
Performance |
| Timeline |
| Western Alaska Minerals |
| Sierra Madre Gold |
Western Alaska and Sierra Madre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Alaska and Sierra Madre
The main advantage of trading using opposite Western Alaska and Sierra Madre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alaska position performs unexpectedly, Sierra Madre 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 Sierra Madre will offset losses from the drop in Sierra Madre's long position.| Western Alaska vs. First Tellurium Corp | Western Alaska vs. Max Resource Corp | Western Alaska vs. P2 Gold | Western Alaska vs. CMC Metals |
| Sierra Madre vs. Equity Metals | Sierra Madre vs. Silver Wolf Exploration | Sierra Madre vs. Western Alaska Minerals | Sierra Madre vs. Summa Silver Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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