Correlation Between Tonogold Resources and West Red

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

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

Diversification Opportunities for Tonogold Resources and West Red

0.32

Correlation Coefficient

Tonogold Resources  West Red

Weak diversification

The 3 months correlation between Tonogold and West is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tonogold Resources and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake and Tonogold Resources 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 Tonogold Resources are associated (or correlated) with West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of Tonogold Resources i.e., Tonogold Resources and West Red go up and down completely randomly.

Pair Corralation between Tonogold Resources and West Red

Given the investment horizon of 90 days Tonogold Resources is expected to generate 3.92 times more return on investment than West Red. However, Tonogold Resources is 3.92 times more volatile than West Red Lake. It trades about 0.04 of its potential returns per unit of risk. West Red Lake is currently generating about 0.04 per unit of risk. If you would invest  1.45  in Tonogold Resources on December 21, 2024 and sell it today you would lose (0.36) from holding Tonogold Resources or give up 24.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Tonogold Resources  vs.  West Red Lake

Tonogold Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tonogold Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Tonogold Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

West Red Lake

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in West Red Lake are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, West Red may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tonogold Resources and West Red

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

The idea behind Tonogold Resources and West Red Lake 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.