Correlation Between Fremont Gold and Wallbridge Mining

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

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

Diversification Opportunities for Fremont Gold and Wallbridge Mining

-0.26

Correlation Coefficient

Fremont Gold  Wallbridge Mining

Very good diversification

The 3 months correlation between Fremont and Wallbridge is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fremont Gold and Wallbridge Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wallbridge Mining and Fremont 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 Fremont Gold are associated (or correlated) with Wallbridge Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wallbridge Mining has no effect on the direction of Fremont Gold i.e., Fremont Gold and Wallbridge Mining go up and down completely randomly.

Pair Corralation between Fremont Gold and Wallbridge Mining

Assuming the 90 days horizon Fremont Gold is expected to generate 1.51 times more return on investment than Wallbridge Mining. However, Fremont Gold is 1.51 times more volatile than Wallbridge Mining. It trades about 0.19 of its potential returns per unit of risk. Wallbridge Mining is currently generating about 0.04 per unit of risk. If you would invest  9.50  in Fremont Gold on October 26, 2024 and sell it today you would earn a total of  1.50  from holding Fremont Gold or generate 15.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.11%
Values	Daily Returns

Fremont Gold  vs.  Wallbridge Mining

Fremont Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fremont Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fremont Gold is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wallbridge Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wallbridge Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Wallbridge Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fremont Gold and Wallbridge Mining

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

The idea behind Fremont Gold and Wallbridge Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.