Correlation Between Agnico Eagle and West Red

Can any of the company-specific risk be diversified away by investing in both Agnico Eagle and West Red 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 Agnico Eagle and West Red into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agnico Eagle Mines and West Red Lake, you can compare the effects of market volatilities on Agnico Eagle and West Red 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 Agnico Eagle with a short position of West Red. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agnico Eagle and West Red.

Diversification Opportunities for Agnico Eagle and West Red

0.49

Correlation Coefficient

Agnico Eagle  West Red

Very weak diversification

The 3 months correlation between Agnico and West is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake and Agnico Eagle 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 Agnico Eagle Mines are associated (or correlated) with West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and West Red go up and down completely randomly.

Pair Corralation between Agnico Eagle and West Red

Considering the 90-day investment horizon Agnico Eagle Mines is expected to generate 0.47 times more return on investment than West Red. However, Agnico Eagle Mines is 2.12 times less risky than West Red. It trades about 0.3 of its potential returns per unit of risk. West Red Lake is currently generating about 0.05 per unit of risk. If you would invest  7,703  in Agnico Eagle Mines on December 19, 2024 and sell it today you would earn a total of  2,879  from holding Agnico Eagle Mines or generate 37.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Agnico Eagle Mines  vs.  West Red Lake

Agnico Eagle Mines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

West Red Lake

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in West Red Lake are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, West Red reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agnico Eagle and West Red

The main advantage of trading using opposite Agnico Eagle and West Red positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agnico Eagle position performs unexpectedly, West Red 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 Red will offset losses from the drop in West Red's long position.

The idea behind Agnico Eagle Mines and West Red Lake pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.