Correlation Between Allegiant Gold and Headwater Gold

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

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

Diversification Opportunities for Allegiant Gold and Headwater Gold

0.28

Correlation Coefficient

Allegiant Gold  Headwater Gold

Modest diversification

The 3 months correlation between Allegiant and Headwater is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Gold and Headwater Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Gold and Allegiant Gold 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 Allegiant Gold are associated (or correlated) with Headwater Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Gold has no effect on the direction of Allegiant Gold i.e., Allegiant Gold and Headwater Gold go up and down completely randomly.

Pair Corralation between Allegiant Gold and Headwater Gold

Assuming the 90 days horizon Allegiant Gold is expected to generate 1.08 times more return on investment than Headwater Gold. However, Allegiant Gold is 1.08 times more volatile than Headwater Gold. It trades about -0.04 of its potential returns per unit of risk. Headwater Gold is currently generating about -0.07 per unit of risk. If you would invest  11.00  in Allegiant Gold on November 28, 2024 and sell it today you would lose (3.00) from holding Allegiant Gold or give up 27.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Allegiant Gold  vs.  Headwater Gold

Allegiant Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allegiant Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Headwater Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Headwater Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Allegiant Gold and Headwater Gold

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

The idea behind Allegiant Gold and Headwater 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 Managers module to screen money managers from public funds and ETFs managed around the world.