Correlation Between OceanaGold and Wesdome Gold

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

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

Diversification Opportunities for OceanaGold and Wesdome Gold

-0.03

Correlation Coefficient

OceanaGold  Wesdome Gold

Good diversification

The 3 months correlation between OceanaGold and Wesdome is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding OceanaGold and Wesdome Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesdome Gold Mines and OceanaGold 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 OceanaGold are associated (or correlated) with Wesdome Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesdome Gold Mines has no effect on the direction of OceanaGold i.e., OceanaGold and Wesdome Gold go up and down completely randomly.

Pair Corralation between OceanaGold and Wesdome Gold

Assuming the 90 days trading horizon OceanaGold is expected to generate 1.08 times more return on investment than Wesdome Gold. However, OceanaGold is 1.08 times more volatile than Wesdome Gold Mines. It trades about 0.18 of its potential returns per unit of risk. Wesdome Gold Mines is currently generating about 0.0 per unit of risk. If you would invest  337.00  in OceanaGold on September 2, 2024 and sell it today you would earn a total of  105.00  from holding OceanaGold or generate 31.16% return on investment over 90 days.

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

OceanaGold  vs.  Wesdome Gold Mines

OceanaGold

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OceanaGold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, OceanaGold displayed solid returns over the last few months and may actually be approaching a breakup point.

Wesdome Gold Mines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesdome Gold Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wesdome Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with OceanaGold and Wesdome Gold

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

The idea behind OceanaGold and Wesdome Gold Mines 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.