Correlation Between Western Capital and RH
Can any of the company-specific risk be diversified away by investing in both Western Capital and RH 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 Capital and RH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Capital Resources and RH, you can compare the effects of market volatilities on Western Capital and RH 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 Capital with a short position of RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Capital and RH.
Diversification Opportunities for Western Capital and RH
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and RH is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Western Capital Resources and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH and Western Capital 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 Capital Resources are associated (or correlated) with RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Western Capital i.e., Western Capital and RH go up and down completely randomly.
Pair Corralation between Western Capital and RH
Given the investment horizon of 90 days Western Capital is expected to generate 2.15 times less return on investment than RH. But when comparing it to its historical volatility, Western Capital Resources is 1.06 times less risky than RH. It trades about 0.09 of its potential returns per unit of risk. RH is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 25,168 in RH on September 2, 2024 and sell it today you would earn a total of 13,346 from holding RH or generate 53.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Capital Resources vs. RH
Performance |
| Timeline |
| Western Capital Resources |
| RH |
Western Capital and RH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Capital and RH
The main advantage of trading using opposite Western Capital and RH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Capital position performs unexpectedly, RH 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 RH will offset losses from the drop in RH's long position.| Western Capital vs. Porsche Automobile Holding | Western Capital vs. Ferrari NV | Western Capital vs. Toyota Motor | Western Capital vs. General Motors |
| RH vs. Purple Innovation | RH vs. Mohawk Industries | RH vs. La Z Boy Incorporated | RH vs. Leggett Platt Incorporated |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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