Correlation Between Magnum Goldcorp and Black Widow

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

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

Diversification Opportunities for Magnum Goldcorp and Black Widow

0.73

Correlation Coefficient

Magnum Goldcorp  Black Widow

Poor diversification

The 3 months correlation between Magnum and Black is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Magnum Goldcorp and Black Widow Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Widow Resources and Magnum Goldcorp 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 Magnum Goldcorp are associated (or correlated) with Black Widow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Widow Resources has no effect on the direction of Magnum Goldcorp i.e., Magnum Goldcorp and Black Widow go up and down completely randomly.

Pair Corralation between Magnum Goldcorp and Black Widow

Assuming the 90 days horizon Magnum Goldcorp is expected to generate 2.58 times more return on investment than Black Widow. However, Magnum Goldcorp is 2.58 times more volatile than Black Widow Resources. It trades about 0.11 of its potential returns per unit of risk. Black Widow Resources is currently generating about 0.04 per unit of risk. If you would invest  4.00  in Magnum Goldcorp on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Magnum Goldcorp or generate 25.0% return on investment over 90 days.

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

Magnum Goldcorp  vs.  Black Widow Resources

Magnum Goldcorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnum Goldcorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Magnum Goldcorp showed solid returns over the last few months and may actually be approaching a breakup point.

Black Widow Resources

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Magnum Goldcorp and Black Widow

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

The idea behind Magnum Goldcorp and Black Widow 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.