Correlation Between West African and Centerra Gold
Can any of the company-specific risk be diversified away by investing in both West African and Centerra Gold 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 West African and Centerra Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West African Resources and Centerra Gold, you can compare the effects of market volatilities on West African and Centerra Gold 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 West African with a short position of Centerra Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of West African and Centerra Gold.
Diversification Opportunities for West African and Centerra Gold
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between West and Centerra is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding West African Resources and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold and West African 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 West African Resources are associated (or correlated) with Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of West African i.e., West African and Centerra Gold go up and down completely randomly.
Pair Corralation between West African and Centerra Gold
Assuming the 90 days horizon West African Resources is expected to under-perform the Centerra Gold. In addition to that, West African is 2.06 times more volatile than Centerra Gold. It trades about -0.05 of its total potential returns per unit of risk. Centerra Gold is currently generating about -0.08 per unit of volatility. If you would invest 719.00 in Centerra Gold on October 31, 2024 and sell it today you would lose (110.00) from holding Centerra Gold or give up 15.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.47% |
| Values | Daily Returns |
West African Resources vs. Centerra Gold
Performance |
| Timeline |
| West African Resources |
| Centerra Gold |
West African and Centerra Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West African and Centerra Gold
The main advantage of trading using opposite West African and Centerra Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West African position performs unexpectedly, Centerra Gold 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 Centerra Gold will offset losses from the drop in Centerra Gold's long position.| West African vs. Harmony Gold Mining | West African vs. AngloGold Ashanti plc | West African vs. Gold Fields Ltd | West African vs. Kinross Gold |
| Centerra Gold vs. Gold Fields Ltd | Centerra Gold vs. Eldorado Gold Corp | Centerra Gold vs. Osisko Gold Ro | Centerra Gold vs. SSR Mining |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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