Correlation Between Big Ridge and New World

Can any of the company-specific risk be diversified away by investing in both Big Ridge and New World 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 Big Ridge and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Ridge Gold and New World Gold, you can compare the effects of market volatilities on Big Ridge and New World 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 Big Ridge with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Ridge and New World.

Diversification Opportunities for Big Ridge and New World

-0.38

Correlation Coefficient

Big Ridge  New World

Very good diversification

The 3 months correlation between Big and New is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold and New World Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Gold and Big Ridge 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 Big Ridge Gold are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Gold has no effect on the direction of Big Ridge i.e., Big Ridge and New World go up and down completely randomly.

Pair Corralation between Big Ridge and New World

Assuming the 90 days horizon Big Ridge is expected to generate 22.96 times less return on investment than New World. But when comparing it to its historical volatility, Big Ridge Gold is 9.41 times less risky than New World. It trades about 0.05 of its potential returns per unit of risk. New World Gold is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.01  in New World Gold on September 3, 2024 and sell it today you would earn a total of  0.00  from holding New World Gold or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Big Ridge Gold  vs.  New World Gold

Big Ridge Gold

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Big Ridge reported solid returns over the last few months and may actually be approaching a breakup point.

New World Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New World Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Big Ridge and New World

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

The idea behind Big Ridge Gold and New World Gold 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.