Correlation Between Gold Fields and NewMarket
Can any of the company-specific risk be diversified away by investing in both Gold Fields and NewMarket 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 Gold Fields and NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and NewMarket, you can compare the effects of market volatilities on Gold Fields and NewMarket 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 Gold Fields with a short position of NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and NewMarket.
Diversification Opportunities for Gold Fields and NewMarket
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gold and NewMarket is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Gold Fields i.e., Gold Fields and NewMarket go up and down completely randomly.
Pair Corralation between Gold Fields and NewMarket
Considering the 90-day investment horizon Gold Fields is expected to generate 1.17 times less return on investment than NewMarket. In addition to that, Gold Fields is 2.12 times more volatile than NewMarket. It trades about 0.03 of its total potential returns per unit of risk. NewMarket is currently generating about 0.07 per unit of volatility. If you would invest 40,297 in NewMarket on August 28, 2024 and sell it today you would earn a total of 14,144 from holding NewMarket or generate 35.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. NewMarket
Performance |
| Timeline |
| Gold Fields |
| NewMarket |
Gold Fields and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and NewMarket
The main advantage of trading using opposite Gold Fields and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.The idea behind Gold Fields Ltd and NewMarket 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.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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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