Correlation Between Gold Road and Wt Financial
Can any of the company-specific risk be diversified away by investing in both Gold Road and Wt Financial 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 Road and Wt Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Road Resources and Wt Financial Group, you can compare the effects of market volatilities on Gold Road and Wt Financial 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 Road with a short position of Wt Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and Wt Financial.
Diversification Opportunities for Gold Road and Wt Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gold and WTL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Wt Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wt Financial Group and Gold Road 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 Road Resources are associated (or correlated) with Wt Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wt Financial Group has no effect on the direction of Gold Road i.e., Gold Road and Wt Financial go up and down completely randomly.
Pair Corralation between Gold Road and Wt Financial
Assuming the 90 days trading horizon Gold Road is expected to generate 1.9 times less return on investment than Wt Financial. But when comparing it to its historical volatility, Gold Road Resources is 1.59 times less risky than Wt Financial. It trades about 0.07 of its potential returns per unit of risk. Wt Financial Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6.16 in Wt Financial Group on August 27, 2024 and sell it today you would earn a total of 3.54 from holding Wt Financial Group or generate 57.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. Wt Financial Group
Performance |
| Timeline |
| Gold Road Resources |
| Wt Financial Group |
Gold Road and Wt Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and Wt Financial
The main advantage of trading using opposite Gold Road and Wt Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, Wt Financial 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 Wt Financial will offset losses from the drop in Wt Financial's long position.| Gold Road vs. Northern Star Resources | Gold Road vs. Evolution Mining | Gold Road vs. Bluescope Steel | Gold Road vs. Sandfire Resources NL |
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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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