Correlation Between Western Copper and Amerigo Resources

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Can any of the company-specific risk be diversified away by investing in both Western Copper and Amerigo 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 Western Copper and Amerigo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Copper and and Amerigo Resources, you can compare the effects of market volatilities on Western Copper and Amerigo 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 Western Copper with a short position of Amerigo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Amerigo Resources.

Diversification Opportunities for Western Copper and Amerigo Resources

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Western and Amerigo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Amerigo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amerigo Resources and Western Copper 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 Copper and are associated (or correlated) with Amerigo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amerigo Resources has no effect on the direction of Western Copper i.e., Western Copper and Amerigo Resources go up and down completely randomly.

Pair Corralation between Western Copper and Amerigo Resources

Assuming the 90 days trading horizon Western Copper and is expected to generate 1.3 times more return on investment than Amerigo Resources. However, Western Copper is 1.3 times more volatile than Amerigo Resources. It trades about 0.07 of its potential returns per unit of risk. Amerigo Resources is currently generating about 0.02 per unit of risk. If you would invest  151.00  in Western Copper and on August 31, 2024 and sell it today you would earn a total of  6.00  from holding Western Copper and or generate 3.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Western Copper and  vs.  Amerigo Resources

 Performance 
       Timeline  
Western Copper 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Western Copper and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Western Copper is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Amerigo Resources 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Amerigo Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Amerigo Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Copper and Amerigo Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Western Copper and Amerigo Resources

The main advantage of trading using opposite Western Copper and Amerigo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, Amerigo 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 Amerigo Resources will offset losses from the drop in Amerigo Resources' long position.
The idea behind Western Copper and and Amerigo Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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