Correlation Between Black Widow and Magnum Goldcorp
Can any of the company-specific risk be diversified away by investing in both Black Widow and Magnum Goldcorp 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 Black Widow and Magnum Goldcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Widow Resources and Magnum Goldcorp, you can compare the effects of market volatilities on Black Widow and Magnum Goldcorp 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 Black Widow with a short position of Magnum Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Widow and Magnum Goldcorp.
Diversification Opportunities for Black Widow and Magnum Goldcorp
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Magnum is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Black Widow Resources and Magnum Goldcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Goldcorp and Black Widow 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 Black Widow Resources are associated (or correlated) with Magnum Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Goldcorp has no effect on the direction of Black Widow i.e., Black Widow and Magnum Goldcorp go up and down completely randomly.
Pair Corralation between Black Widow and Magnum Goldcorp
Assuming the 90 days horizon Black Widow Resources is expected to under-perform the Magnum Goldcorp. But the stock apears to be less risky and, when comparing its historical volatility, Black Widow Resources is 3.7 times less risky than Magnum Goldcorp. The stock trades about -0.21 of its potential returns per unit of risk. The Magnum Goldcorp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Magnum Goldcorp on August 26, 2024 and sell it today you would lose (3.00) from holding Magnum Goldcorp or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Widow Resources vs. Magnum Goldcorp
Performance |
| Timeline |
| Black Widow Resources |
| Magnum Goldcorp |
Black Widow and Magnum Goldcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Widow and Magnum Goldcorp
The main advantage of trading using opposite Black Widow and Magnum Goldcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Widow position performs unexpectedly, Magnum Goldcorp 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 Magnum Goldcorp will offset losses from the drop in Magnum Goldcorp's long position.| Black Widow vs. First Majestic Silver | Black Widow vs. Ivanhoe Energy | Black Widow vs. Orezone Gold Corp | Black Widow vs. Faraday Copper Corp |
| Magnum Goldcorp vs. 2028 Investment Grade | Magnum Goldcorp vs. Brookfield Investments | Magnum Goldcorp vs. T2 Metals Corp | Magnum Goldcorp vs. Partners Value Investments |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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