Correlation Between Westaim Corp and Covalon Technologies
Can any of the company-specific risk be diversified away by investing in both Westaim Corp and Covalon Technologies 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 Westaim Corp and Covalon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westaim Corp and Covalon Technologies, you can compare the effects of market volatilities on Westaim Corp and Covalon Technologies 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 Westaim Corp with a short position of Covalon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westaim Corp and Covalon Technologies.
Diversification Opportunities for Westaim Corp and Covalon Technologies
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westaim and Covalon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Westaim Corp and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and Westaim Corp 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 Westaim Corp are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Westaim Corp i.e., Westaim Corp and Covalon Technologies go up and down completely randomly.
Pair Corralation between Westaim Corp and Covalon Technologies
Assuming the 90 days horizon Westaim Corp is expected to generate 4.35 times less return on investment than Covalon Technologies. But when comparing it to its historical volatility, Westaim Corp is 3.71 times less risky than Covalon Technologies. It trades about 0.07 of its potential returns per unit of risk. Covalon Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 344.00 in Covalon Technologies on September 3, 2024 and sell it today you would earn a total of 21.00 from holding Covalon Technologies or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westaim Corp vs. Covalon Technologies
Performance |
| Timeline |
| Westaim Corp |
| Covalon Technologies |
Westaim Corp and Covalon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westaim Corp and Covalon Technologies
The main advantage of trading using opposite Westaim Corp and Covalon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westaim Corp position performs unexpectedly, Covalon Technologies 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 Covalon Technologies will offset losses from the drop in Covalon Technologies' long position.| Westaim Corp vs. Pulse Seismic | Westaim Corp vs. Quarterhill | Westaim Corp vs. Kneat Inc | Westaim Corp vs. Trisura Group |
| Covalon Technologies vs. Westaim Corp | Covalon Technologies vs. Pulse Seismic | Covalon Technologies vs. Quarterhill | Covalon Technologies vs. TECSYS Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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