Correlation Between American West and E79 Gold
Can any of the company-specific risk be diversified away by investing in both American West and E79 Gold 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 American West and E79 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American West Metals and E79 Gold Mines, you can compare the effects of market volatilities on American West and E79 Gold 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 American West with a short position of E79 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and E79 Gold.
Diversification Opportunities for American West and E79 Gold
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and E79 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American West Metals and E79 Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E79 Gold Mines and American 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 American West Metals are associated (or correlated) with E79 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E79 Gold Mines has no effect on the direction of American West i.e., American West and E79 Gold go up and down completely randomly.
Pair Corralation between American West and E79 Gold
Assuming the 90 days trading horizon American West Metals is expected to generate 0.97 times more return on investment than E79 Gold. However, American West Metals is 1.03 times less risky than E79 Gold. It trades about -0.02 of its potential returns per unit of risk. E79 Gold Mines is currently generating about -0.05 per unit of risk. If you would invest 13.00 in American West Metals on September 4, 2024 and sell it today you would lose (6.20) from holding American West Metals or give up 47.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
American West Metals vs. E79 Gold Mines
Performance |
| Timeline |
| American West Metals |
| E79 Gold Mines |
American West and E79 Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and E79 Gold
The main advantage of trading using opposite American West and E79 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West position performs unexpectedly, E79 Gold 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 E79 Gold will offset losses from the drop in E79 Gold's long position.| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Sandfire Resources NL |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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