Correlation Between Headwater Gold and Irving Resources

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

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

Diversification Opportunities for Headwater Gold and Irving Resources

0.42

Correlation Coefficient

Headwater Gold  Irving Resources

Very weak diversification

The 3 months correlation between Headwater and Irving is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Headwater Gold and Irving Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Irving Resources and Headwater 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 Headwater Gold are associated (or correlated) with Irving Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Irving Resources has no effect on the direction of Headwater Gold i.e., Headwater Gold and Irving Resources go up and down completely randomly.

Pair Corralation between Headwater Gold and Irving Resources

Assuming the 90 days horizon Headwater Gold is expected to generate 0.94 times more return on investment than Irving Resources. However, Headwater Gold is 1.06 times less risky than Irving Resources. It trades about -0.07 of its potential returns per unit of risk. Irving Resources is currently generating about -0.07 per unit of risk. If you would invest  15.00  in Headwater Gold on November 28, 2024 and sell it today you would lose (5.00) from holding Headwater Gold or give up 33.33% of portfolio value over 90 days.

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

Headwater Gold  vs.  Irving Resources

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.

Irving Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Irving Resources 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.

Pair Trading with Headwater Gold and Irving Resources

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

The idea behind Headwater Gold and Irving Resources 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.