Correlation Between Galantas Gold and Wescan Goldfields

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

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

Diversification Opportunities for Galantas Gold and Wescan Goldfields

0.71

Correlation Coefficient

Galantas Gold  Wescan Goldfields

Poor diversification

The 3 months correlation between Galantas and Wescan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Galantas Gold Corp and Wescan Goldfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wescan Goldfields and Galantas 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 Galantas Gold Corp are associated (or correlated) with Wescan Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wescan Goldfields has no effect on the direction of Galantas Gold i.e., Galantas Gold and Wescan Goldfields go up and down completely randomly.

Pair Corralation between Galantas Gold and Wescan Goldfields

Assuming the 90 days horizon Galantas Gold Corp is expected to under-perform the Wescan Goldfields. But the stock apears to be less risky and, when comparing its historical volatility, Galantas Gold Corp is 2.18 times less risky than Wescan Goldfields. The stock trades about -0.03 of its potential returns per unit of risk. The Wescan Goldfields is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Wescan Goldfields on October 7, 2024 and sell it today you would lose (0.50) from holding Wescan Goldfields or give up 12.5% of portfolio value over 90 days.

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

Galantas Gold Corp  vs.  Wescan Goldfields

Galantas Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galantas Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Wescan Goldfields

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wescan Goldfields are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wescan Goldfields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galantas Gold and Wescan Goldfields

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

The idea behind Galantas Gold Corp and Wescan Goldfields 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.