Correlation Between Western Sierra and The9
Can any of the company-specific risk be diversified away by investing in both Western Sierra and The9 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 Sierra and The9 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Sierra Mining and The9 Ltd ADR, you can compare the effects of market volatilities on Western Sierra and The9 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 Sierra with a short position of The9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and The9.
Diversification Opportunities for Western Sierra and The9
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and The9 is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and The9 Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The9 Ltd ADR and Western Sierra 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 Sierra Mining are associated (or correlated) with The9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The9 Ltd ADR has no effect on the direction of Western Sierra i.e., Western Sierra and The9 go up and down completely randomly.
Pair Corralation between Western Sierra and The9
Given the investment horizon of 90 days Western Sierra Mining is expected to generate 15.03 times more return on investment than The9. However, Western Sierra is 15.03 times more volatile than The9 Ltd ADR. It trades about 0.1 of its potential returns per unit of risk. The9 Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest 8.88 in Western Sierra Mining on September 3, 2024 and sell it today you would lose (8.20) from holding Western Sierra Mining or give up 92.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Western Sierra Mining vs. The9 Ltd ADR
Performance |
| Timeline |
| Western Sierra Mining |
| The9 Ltd ADR |
Western Sierra and The9 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and The9
The main advantage of trading using opposite Western Sierra and The9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra position performs unexpectedly, The9 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 The9 will offset losses from the drop in The9's long position.| Western Sierra vs. Cann American Corp | Western Sierra vs. Genomma Lab Internacional | Western Sierra vs. Speakeasy Cannabis Club | Western Sierra vs. Benchmark Botanics |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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