Correlation Between Dundee Precious and Wesdome Gold

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Can any of the company-specific risk be diversified away by investing in both Dundee Precious and Wesdome 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 Dundee Precious and Wesdome Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dundee Precious Metals and Wesdome Gold Mines, you can compare the effects of market volatilities on Dundee Precious and Wesdome 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 Dundee Precious with a short position of Wesdome Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dundee Precious and Wesdome Gold.

Diversification Opportunities for Dundee Precious and Wesdome Gold

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dundee and Wesdome is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Wesdome Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesdome Gold Mines and Dundee Precious 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 Dundee Precious Metals are associated (or correlated) with Wesdome Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesdome Gold Mines has no effect on the direction of Dundee Precious i.e., Dundee Precious and Wesdome Gold go up and down completely randomly.

Pair Corralation between Dundee Precious and Wesdome Gold

Assuming the 90 days trading horizon Dundee Precious Metals is expected to generate 0.76 times more return on investment than Wesdome Gold. However, Dundee Precious Metals is 1.31 times less risky than Wesdome Gold. It trades about 0.23 of its potential returns per unit of risk. Wesdome Gold Mines is currently generating about 0.14 per unit of risk. If you would invest  1,350  in Dundee Precious Metals on November 3, 2024 and sell it today you would earn a total of  123.00  from holding Dundee Precious Metals or generate 9.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dundee Precious Metals  vs.  Wesdome Gold Mines

 Performance 
       Timeline  
Dundee Precious Metals 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Precious Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Dundee Precious may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Wesdome Gold Mines 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Wesdome Gold Mines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Wesdome Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Dundee Precious and Wesdome Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dundee Precious and Wesdome Gold

The main advantage of trading using opposite Dundee Precious and Wesdome Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dundee Precious position performs unexpectedly, Wesdome 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 Wesdome Gold will offset losses from the drop in Wesdome Gold's long position.
The idea behind Dundee Precious Metals and Wesdome Gold Mines 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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