Correlation Between Western Investment and Information Services

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

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

Diversification Opportunities for Western Investment and Information Services

0.59

Correlation Coefficient

Western Investment  Information Services

Very weak diversification

The 3 months correlation between Western and Information is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and Western Investment 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 Investment are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Western Investment i.e., Western Investment and Information Services go up and down completely randomly.

Pair Corralation between Western Investment and Information Services

Given the investment horizon of 90 days Western Investment is expected to generate 1.14 times less return on investment than Information Services. In addition to that, Western Investment is 2.68 times more volatile than Information Services. It trades about 0.08 of its total potential returns per unit of risk. Information Services is currently generating about 0.24 per unit of volatility. If you would invest  2,661  in Information Services on April 23, 2025 and sell it today you would earn a total of  589.00  from holding Information Services or generate 22.13% return on investment over 90 days.

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

Western Investment  vs.  Information Services

Western Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 6 (%) 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.

Information Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Information Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Investment and Information Services

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

The idea behind Western Investment and Information Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.