Correlation Between West African and Wesdome Gold
Can any of the company-specific risk be diversified away by investing in both West African and Wesdome 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 Wesdome 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 Wesdome Gold Mines, you can compare the effects of market volatilities on West African and Wesdome 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 Wesdome Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of West African and Wesdome Gold.
Diversification Opportunities for West African and Wesdome Gold
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between West and Wesdome is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding West African Resources and Wesdome Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesdome Gold Mines 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 Wesdome Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesdome Gold Mines has no effect on the direction of West African i.e., West African and Wesdome Gold go up and down completely randomly.
Pair Corralation between West African and Wesdome Gold
Assuming the 90 days horizon West African Resources is expected to under-perform the Wesdome Gold. In addition to that, West African is 1.9 times more volatile than Wesdome Gold Mines. It trades about -0.05 of its total potential returns per unit of risk. Wesdome Gold Mines is currently generating about 0.04 per unit of volatility. If you would invest 918.00 in Wesdome Gold Mines on October 31, 2024 and sell it today you would earn a total of 56.00 from holding Wesdome Gold Mines or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.47% |
| Values | Daily Returns |
West African Resources vs. Wesdome Gold Mines
Performance |
| Timeline |
| West African Resources |
| Wesdome Gold Mines |
West African and Wesdome Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West African and Wesdome Gold
The main advantage of trading using opposite West African and Wesdome Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West African position performs unexpectedly, Wesdome 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 Wesdome Gold will offset losses from the drop in Wesdome 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 |
| Wesdome Gold vs. Victoria Gold Corp | Wesdome Gold vs. Cassiar Gold Corp | Wesdome Gold vs. Liberty Gold Corp | Wesdome Gold vs. I 80 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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