Correlation Between GoldMining and Virgin Wines
Can any of the company-specific risk be diversified away by investing in both GoldMining and Virgin Wines 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 GoldMining and Virgin Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Virgin Wines UK, you can compare the effects of market volatilities on GoldMining and Virgin Wines 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 GoldMining with a short position of Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Virgin Wines.
Diversification Opportunities for GoldMining and Virgin Wines
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GoldMining and Virgin is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK and GoldMining 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 GoldMining are associated (or correlated) with Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of GoldMining i.e., GoldMining and Virgin Wines go up and down completely randomly.
Pair Corralation between GoldMining and Virgin Wines
Assuming the 90 days trading horizon GoldMining is expected to under-perform the Virgin Wines. In addition to that, GoldMining is 1.6 times more volatile than Virgin Wines UK. It trades about -0.03 of its total potential returns per unit of risk. Virgin Wines UK is currently generating about -0.04 per unit of volatility. If you would invest 6,950 in Virgin Wines UK on August 28, 2024 and sell it today you would lose (3,400) from holding Virgin Wines UK or give up 48.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 35.41% |
| Values | Daily Returns |
GoldMining vs. Virgin Wines UK
Performance |
| Timeline |
| GoldMining |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Virgin Wines UK |
GoldMining and Virgin Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and Virgin Wines
The main advantage of trading using opposite GoldMining and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining position performs unexpectedly, Virgin Wines 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 Virgin Wines will offset losses from the drop in Virgin Wines' long position.| GoldMining vs. Samsung Electronics Co | GoldMining vs. Samsung Electronics Co | GoldMining vs. Hyundai Motor | GoldMining vs. Toyota Motor Corp |
| Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Hyundai Motor | Virgin Wines 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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