Correlation Between Aldebaran Resources and KWG Resources
Can any of the company-specific risk be diversified away by investing in both Aldebaran Resources and KWG Resources 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 Aldebaran Resources and KWG Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aldebaran Resources and KWG Resources, you can compare the effects of market volatilities on Aldebaran Resources and KWG Resources 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 Aldebaran Resources with a short position of KWG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldebaran Resources and KWG Resources.
Diversification Opportunities for Aldebaran Resources and KWG Resources
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Aldebaran and KWG is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aldebaran Resources and KWG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWG Resources and Aldebaran Resources 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 Aldebaran Resources are associated (or correlated) with KWG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWG Resources has no effect on the direction of Aldebaran Resources i.e., Aldebaran Resources and KWG Resources go up and down completely randomly.
Pair Corralation between Aldebaran Resources and KWG Resources
Assuming the 90 days horizon Aldebaran Resources is expected to generate 2.01 times less return on investment than KWG Resources. But when comparing it to its historical volatility, Aldebaran Resources is 4.21 times less risky than KWG Resources. It trades about 0.15 of its potential returns per unit of risk. KWG Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.00 in KWG Resources on August 29, 2024 and sell it today you would earn a total of 0.05 from holding KWG Resources or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aldebaran Resources vs. KWG Resources
Performance |
| Timeline |
| Aldebaran Resources |
| KWG Resources |
Aldebaran Resources and KWG Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aldebaran Resources and KWG Resources
The main advantage of trading using opposite Aldebaran Resources and KWG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldebaran Resources position performs unexpectedly, KWG Resources 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 KWG Resources will offset losses from the drop in KWG Resources' long position.| Aldebaran Resources vs. Huntsman Exploration | Aldebaran Resources vs. Aurelia Metals Limited | Aldebaran Resources vs. Adriatic Metals PLC | Aldebaran Resources vs. American Helium |
| KWG Resources vs. Ascendant Resources | KWG Resources vs. Cantex Mine Development | KWG Resources vs. Amarc Resources | KWG Resources vs. Sterling Metals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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