Correlation Between American West and Gold Road
Can any of the company-specific risk be diversified away by investing in both American West and Gold Road 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 Gold Road 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 Gold Road Resources, you can compare the effects of market volatilities on American West and Gold Road 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 Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and Gold Road.
Diversification Opportunities for American West and Gold Road
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Gold is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding American West Metals and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources 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 Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of American West i.e., American West and Gold Road go up and down completely randomly.
Pair Corralation between American West and Gold Road
Assuming the 90 days trading horizon American West Metals is expected to under-perform the Gold Road. In addition to that, American West is 1.24 times more volatile than Gold Road Resources. It trades about -0.35 of its total potential returns per unit of risk. Gold Road Resources is currently generating about -0.04 per unit of volatility. If you would invest 192.00 in Gold Road Resources on August 30, 2024 and sell it today you would lose (5.00) from holding Gold Road Resources or give up 2.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American West Metals vs. Gold Road Resources
Performance |
| Timeline |
| American West Metals |
| Gold Road Resources |
American West and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and Gold Road
The main advantage of trading using opposite American West and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West position performs unexpectedly, Gold Road 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 Gold Road will offset losses from the drop in Gold Road'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 |
| Gold Road vs. Northern Star Resources | Gold Road vs. Evolution Mining | Gold Road vs. Bluescope Steel | Gold Road vs. Sandfire Resources NL |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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