Correlation Between West African and Karora Resources
Can any of the company-specific risk be diversified away by investing in both West African and Karora Resources 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 Karora Resources 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 Karora Resources, you can compare the effects of market volatilities on West African and Karora Resources 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 Karora Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of West African and Karora Resources.
Diversification Opportunities for West African and Karora Resources
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between West and Karora is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding West African Resources and Karora Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karora Resources 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 Karora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karora Resources has no effect on the direction of West African i.e., West African and Karora Resources go up and down completely randomly.
Pair Corralation between West African and Karora Resources
Assuming the 90 days horizon West African Resources is expected to generate 4.66 times more return on investment than Karora Resources. However, West African is 4.66 times more volatile than Karora Resources. It trades about 0.09 of its potential returns per unit of risk. Karora Resources is currently generating about 0.18 per unit of risk. If you would invest 53.00 in West African Resources on August 27, 2024 and sell it today you would earn a total of 41.00 from holding West African Resources or generate 77.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 57.67% |
| Values | Daily Returns |
West African Resources vs. Karora Resources
Performance |
| Timeline |
| West African Resources |
| Karora Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
West African and Karora Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West African and Karora Resources
The main advantage of trading using opposite West African and Karora Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West African position performs unexpectedly, Karora Resources 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 Karora Resources will offset losses from the drop in Karora Resources' 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 |
| Karora Resources vs. K92 Mining | Karora Resources vs. I 80 Gold Corp | Karora Resources vs. Wesdome Gold Mines | Karora Resources vs. GGX Gold 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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