Correlation Between American Pacific and West African
Can any of the company-specific risk be diversified away by investing in both American Pacific and West African 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 American Pacific and West African into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Pacific Mining and West African Resources, you can compare the effects of market volatilities on American Pacific and West African 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 American Pacific with a short position of West African. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Pacific and West African.
Diversification Opportunities for American Pacific and West African
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and West is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Pacific Mining and West African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West African Resources and American Pacific 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 American Pacific Mining are associated (or correlated) with West African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West African Resources has no effect on the direction of American Pacific i.e., American Pacific and West African go up and down completely randomly.
Pair Corralation between American Pacific and West African
Assuming the 90 days horizon American Pacific Mining is expected to generate 3.63 times more return on investment than West African. However, American Pacific is 3.63 times more volatile than West African Resources. It trades about 0.32 of its potential returns per unit of risk. West African Resources is currently generating about -0.21 per unit of risk. If you would invest 9.27 in American Pacific Mining on September 2, 2024 and sell it today you would earn a total of 8.73 from holding American Pacific Mining or generate 94.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Pacific Mining vs. West African Resources
Performance |
| Timeline |
| American Pacific Mining |
| West African Resources |
American Pacific and West African Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Pacific and West African
The main advantage of trading using opposite American Pacific and West African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Pacific position performs unexpectedly, West African 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 West African will offset losses from the drop in West African's long position.| American Pacific vs. Westward Gold | American Pacific vs. Heliostar Metals | American Pacific vs. Revival Gold | American Pacific vs. Cabral Gold |
| West African vs. Aurion Resources | West African vs. Rio2 Limited | West African vs. Palamina Corp | West African vs. BTU Metals Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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