Correlation Between Western Sierra and SGS SA
Can any of the company-specific risk be diversified away by investing in both Western Sierra and SGS SA 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 SGS SA 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 SGS SA, you can compare the effects of market volatilities on Western Sierra and SGS SA 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 SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and SGS SA.
Diversification Opportunities for Western Sierra and SGS SA
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and SGS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Western Sierra i.e., Western Sierra and SGS SA go up and down completely randomly.
Pair Corralation between Western Sierra and SGS SA
Given the investment horizon of 90 days Western Sierra Mining is expected to generate 100.22 times more return on investment than SGS SA. However, Western Sierra is 100.22 times more volatile than SGS SA. It trades about 0.14 of its potential returns per unit of risk. SGS SA is currently generating about 0.05 per unit of risk. If you would invest 2.50 in Western Sierra Mining on September 1, 2024 and sell it today you would lose (1.82) from holding Western Sierra Mining or give up 72.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Western Sierra Mining vs. SGS SA
Performance |
| Timeline |
| Western Sierra Mining |
| SGS SA |
Western Sierra and SGS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and SGS SA
The main advantage of trading using opposite Western Sierra and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra position performs unexpectedly, SGS SA 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 SGS SA will offset losses from the drop in SGS SA's long position.| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Rimrock Gold Corp | Western Sierra vs. Galexxy Holdings |
| SGS SA vs. Willamette Valley Vineyards | SGS SA vs. China Tontine Wines | SGS SA vs. PepsiCo | SGS SA vs. Thor Industries |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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