Correlation Between Fortescue Metals and Westgold Resources
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and Westgold Resources 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 Fortescue Metals and Westgold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Westgold Resources, you can compare the effects of market volatilities on Fortescue Metals and Westgold Resources 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 Fortescue Metals with a short position of Westgold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Westgold Resources.
Diversification Opportunities for Fortescue Metals and Westgold Resources
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fortescue and Westgold is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Westgold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westgold Resources and Fortescue Metals 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 Fortescue Metals Group are associated (or correlated) with Westgold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westgold Resources has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Westgold Resources go up and down completely randomly.
Pair Corralation between Fortescue Metals and Westgold Resources
Assuming the 90 days horizon Fortescue Metals is expected to generate 6.44 times less return on investment than Westgold Resources. But when comparing it to its historical volatility, Fortescue Metals Group is 1.76 times less risky than Westgold Resources. It trades about 0.02 of its potential returns per unit of risk. Westgold Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 63.00 in Westgold Resources on November 5, 2024 and sell it today you would earn a total of 89.00 from holding Westgold Resources or generate 141.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. Westgold Resources
Performance |
| Timeline |
| Fortescue Metals |
| Westgold Resources |
Fortescue Metals and Westgold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Westgold Resources
The main advantage of trading using opposite Fortescue Metals and Westgold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals position performs unexpectedly, Westgold Resources 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 Westgold Resources will offset losses from the drop in Westgold Resources' long position.| Fortescue Metals vs. CAIRN HOMES EO | Fortescue Metals vs. Richardson Electronics | Fortescue Metals vs. STMICROELECTRONICS | Fortescue Metals vs. Meiko Electronics Co |
| Westgold Resources vs. MOUNT GIBSON IRON | Westgold Resources vs. Zoom Video Communications | Westgold Resources vs. TELECOM ITALRISP ADR10 | Westgold Resources vs. INTERNET INJPADR 1 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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