Correlation Between E L and Western Copper

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

By analyzing existing cross correlation between E L Financial 3 and Western Copper and, you can compare the effects of market volatilities on E L and Western Copper 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 E L with a short position of Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Western Copper.

Diversification Opportunities for E L and Western Copper

0.62

Correlation Coefficient

E L  Western Copper

Poor diversification

The 3 months correlation between ELF-PH and Western is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial 3 and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper and E L 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 E L Financial 3 are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of E L i.e., E L and Western Copper go up and down completely randomly.

Pair Corralation between E L and Western Copper

Assuming the 90 days trading horizon E L is expected to generate 1.39 times less return on investment than Western Copper. But when comparing it to its historical volatility, E L Financial 3 is 5.62 times less risky than Western Copper. It trades about 0.2 of its potential returns per unit of risk. Western Copper and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  158.00  in Western Copper and on April 22, 2025 and sell it today you would earn a total of  11.00  from holding Western Copper and or generate 6.96% return on investment over 90 days.

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

E L Financial 3  vs.  Western Copper and

E L Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial 3 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, E L may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Western Copper

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Copper and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Western Copper may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with E L and Western Copper

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

The idea behind E L Financial 3 and Western Copper and 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.