Correlation Between Dow and Newmont Goldcorp
Can any of the company-specific risk be diversified away by investing in both Dow and Newmont 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 Dow and Newmont Goldcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Inc and Newmont Goldcorp Corp, you can compare the effects of market volatilities on Dow and Newmont 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 Dow with a short position of Newmont Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Newmont Goldcorp.
Diversification Opportunities for Dow and Newmont Goldcorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Newmont is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Newmont Goldcorp Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont Goldcorp Corp and Dow 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 Dow Inc are associated (or correlated) with Newmont Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont Goldcorp Corp has no effect on the direction of Dow i.e., Dow and Newmont Goldcorp go up and down completely randomly.
Pair Corralation between Dow and Newmont Goldcorp
Considering the 90-day investment horizon Dow Inc is expected to under-perform the Newmont Goldcorp. But the stock apears to be less risky and, when comparing its historical volatility, Dow Inc is 1.16 times less risky than Newmont Goldcorp. The stock trades about -0.22 of its potential returns per unit of risk. The Newmont Goldcorp Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,499 in Newmont Goldcorp Corp on November 1, 2024 and sell it today you would lose (190.00) from holding Newmont Goldcorp Corp or give up 4.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Inc vs. Newmont Goldcorp Corp
Performance |
| Timeline |
| Dow Inc |
| Newmont Goldcorp Corp |
Dow and Newmont Goldcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow and Newmont Goldcorp
The main advantage of trading using opposite Dow and Newmont Goldcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow position performs unexpectedly, Newmont 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 Newmont Goldcorp will offset losses from the drop in Newmont Goldcorp's long position.The idea behind Dow Inc and Newmont Goldcorp Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Newmont Goldcorp vs. Pan American Silver | Newmont Goldcorp vs. Agnico Eagle Mines | Newmont Goldcorp vs. Kinross Gold | Newmont Goldcorp vs. Wheaton Precious Metals |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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