Correlation Between New Gold and Worthington Steel
Can any of the company-specific risk be diversified away by investing in both New Gold and Worthington Steel 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 New Gold and Worthington Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Gold and Worthington Steel, you can compare the effects of market volatilities on New Gold and Worthington Steel 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 New Gold with a short position of Worthington Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Gold and Worthington Steel.
Diversification Opportunities for New Gold and Worthington Steel
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and Worthington is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding New Gold and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel and New Gold 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 New Gold are associated (or correlated) with Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of New Gold i.e., New Gold and Worthington Steel go up and down completely randomly.
Pair Corralation between New Gold and Worthington Steel
Considering the 90-day investment horizon New Gold is expected to under-perform the Worthington Steel. But the stock apears to be less risky and, when comparing its historical volatility, New Gold is 1.08 times less risky than Worthington Steel. The stock trades about -0.02 of its potential returns per unit of risk. The Worthington Steel is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,234 in Worthington Steel on September 3, 2024 and sell it today you would earn a total of 1,250 from holding Worthington Steel or generate 38.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Gold vs. Worthington Steel
Performance |
| Timeline |
| New Gold |
| Worthington Steel |
New Gold and Worthington Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Gold and Worthington Steel
The main advantage of trading using opposite New Gold and Worthington Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Gold position performs unexpectedly, Worthington Steel 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 Worthington Steel will offset losses from the drop in Worthington Steel's long position.| New Gold vs. Eldorado Gold Corp | New Gold vs. Kinross Gold | New Gold vs. Harmony Gold Mining | New Gold vs. Coeur Mining |
| Worthington Steel vs. Warner Music Group | Worthington Steel vs. Regeneron Pharmaceuticals | Worthington Steel vs. Apogee Therapeutics, Common | Worthington Steel vs. Sabra Healthcare REIT |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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