Correlation Between West African and First Mining
Can any of the company-specific risk be diversified away by investing in both West African and First Mining 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 First Mining 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 First Mining Gold, you can compare the effects of market volatilities on West African and First Mining 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 First Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of West African and First Mining.
Diversification Opportunities for West African and First Mining
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between West and First is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding West African Resources and First Mining Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mining 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 First Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mining Gold has no effect on the direction of West African i.e., West African and First Mining go up and down completely randomly.
Pair Corralation between West African and First Mining
Assuming the 90 days horizon West African Resources is expected to under-perform the First Mining. But the pink sheet apears to be less risky and, when comparing its historical volatility, West African Resources is 1.37 times less risky than First Mining. The pink sheet trades about -0.21 of its potential returns per unit of risk. The First Mining Gold is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 9.80 in First Mining Gold on September 3, 2024 and sell it today you would lose (0.65) from holding First Mining Gold or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
West African Resources vs. First Mining Gold
Performance |
| Timeline |
| West African Resources |
| First Mining Gold |
West African and First Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West African and First Mining
The main advantage of trading using opposite West African and First Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West African position performs unexpectedly, First Mining 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 First Mining will offset losses from the drop in First Mining'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 |
| First Mining vs. Aurion Resources | First Mining vs. Orezone Gold Corp | First Mining vs. Rio2 Limited | First Mining vs. Norsemont 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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