Correlation Between Birchtech Corp and Western Investment

Can any of the company-specific risk be diversified away by investing in both Birchtech Corp and Western Investment 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 Birchtech Corp and Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Birchtech Corp and Western Investment, you can compare the effects of market volatilities on Birchtech Corp and Western Investment 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 Birchtech Corp with a short position of Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birchtech Corp and Western Investment.

Diversification Opportunities for Birchtech Corp and Western Investment

0.38

Correlation Coefficient

Birchtech Corp  Western Investment

Weak diversification

The 3 months correlation between Birchtech and Western is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Birchtech Corp and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Birchtech 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 Birchtech Corp are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Birchtech Corp i.e., Birchtech Corp and Western Investment go up and down completely randomly.

Pair Corralation between Birchtech Corp and Western Investment

Assuming the 90 days trading horizon Birchtech Corp is expected to generate 1.17 times more return on investment than Western Investment. However, Birchtech Corp is 1.17 times more volatile than Western Investment. It trades about 0.13 of its potential returns per unit of risk. Western Investment is currently generating about 0.12 per unit of risk. If you would invest  64.00  in Birchtech Corp on April 21, 2025 and sell it today you would earn a total of  23.00  from holding Birchtech Corp or generate 35.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Birchtech Corp  vs.  Western Investment

Birchtech Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Birchtech Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Birchtech Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Birchtech Corp and Western Investment

The main advantage of trading using opposite Birchtech Corp and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birchtech Corp position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.

The idea behind Birchtech Corp and Western Investment 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.