Correlation Between Caledonia Mining and Westward Gold
Can any of the company-specific risk be diversified away by investing in both Caledonia Mining and Westward 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 Caledonia Mining and Westward Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Westward Gold, you can compare the effects of market volatilities on Caledonia Mining and Westward 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 Caledonia Mining with a short position of Westward Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Westward Gold.
Diversification Opportunities for Caledonia Mining and Westward Gold
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Caledonia and Westward is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Westward Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westward Gold and Caledonia Mining 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 Caledonia Mining are associated (or correlated) with Westward Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westward Gold has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Westward Gold go up and down completely randomly.
Pair Corralation between Caledonia Mining and Westward Gold
Given the investment horizon of 90 days Caledonia Mining is expected to generate 5.56 times less return on investment than Westward Gold. But when comparing it to its historical volatility, Caledonia Mining is 3.38 times less risky than Westward Gold. It trades about 0.03 of its potential returns per unit of risk. Westward Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5.75 in Westward Gold on September 2, 2024 and sell it today you would lose (0.44) from holding Westward Gold or give up 7.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Mining vs. Westward Gold
Performance |
| Timeline |
| Caledonia Mining |
| Westward Gold |
Caledonia Mining and Westward Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Mining and Westward Gold
The main advantage of trading using opposite Caledonia Mining and Westward Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining position performs unexpectedly, Westward 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 Westward Gold will offset losses from the drop in Westward Gold's long position.| Caledonia Mining vs. DRDGOLD Limited ADR | Caledonia Mining vs. Galiano Gold | Caledonia Mining vs. Mastech Holdings | Caledonia Mining vs. EMX Royalty Corp |
| Westward Gold vs. Aurion Resources | Westward Gold vs. Rio2 Limited | Westward Gold vs. Palamina Corp | Westward Gold vs. Grande Portage Resources |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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