Correlation Between Pinnacle West and GoldMining
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and GoldMining 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 Pinnacle West and GoldMining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle West Capital and GoldMining, you can compare the effects of market volatilities on Pinnacle West and GoldMining 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 Pinnacle West with a short position of GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and GoldMining.
Diversification Opportunities for Pinnacle West and GoldMining
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pinnacle and GoldMining is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and Pinnacle West 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 Pinnacle West Capital are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Pinnacle West i.e., Pinnacle West and GoldMining go up and down completely randomly.
Pair Corralation between Pinnacle West and GoldMining
Assuming the 90 days trading horizon Pinnacle West Capital is expected to generate 0.34 times more return on investment than GoldMining. However, Pinnacle West Capital is 2.92 times less risky than GoldMining. It trades about 0.05 of its potential returns per unit of risk. GoldMining is currently generating about -0.03 per unit of risk. If you would invest 7,106 in Pinnacle West Capital on August 28, 2024 and sell it today you would earn a total of 2,180 from holding Pinnacle West Capital or generate 30.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 41.9% |
| Values | Daily Returns |
Pinnacle West Capital vs. GoldMining
Performance |
| Timeline |
| Pinnacle West Capital |
| GoldMining |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Pinnacle West and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and GoldMining
The main advantage of trading using opposite Pinnacle West and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.| Pinnacle West vs. Samsung Electronics Co | Pinnacle West vs. Samsung Electronics Co | Pinnacle West vs. Hyundai Motor | Pinnacle West vs. Toyota Motor Corp |
| GoldMining vs. Samsung Electronics Co | GoldMining vs. Samsung Electronics Co | GoldMining vs. Hyundai Motor | GoldMining vs. Toyota Motor Corp |
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.
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