Correlation Between Wesdome Gold and New Gold

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

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

Diversification Opportunities for Wesdome Gold and New Gold

0.45

Correlation Coefficient

Wesdome Gold  New Gold

Very weak diversification

The 3 months correlation between Wesdome and New is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines and New Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Gold and Wesdome 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 Wesdome Gold Mines are associated (or correlated) with New Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Gold has no effect on the direction of Wesdome Gold i.e., Wesdome Gold and New Gold go up and down completely randomly.

Pair Corralation between Wesdome Gold and New Gold

Assuming the 90 days trading horizon Wesdome Gold Mines is expected to under-perform the New Gold. But the stock apears to be less risky and, when comparing its historical volatility, Wesdome Gold Mines is 1.23 times less risky than New Gold. The stock trades about 0.0 of its potential returns per unit of risk. The New Gold is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  316.00  in New Gold on August 31, 2024 and sell it today you would earn a total of  69.00  from holding New Gold or generate 21.84% return on investment over 90 days.

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

Wesdome Gold Mines  vs.  New Gold

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.

New Gold

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, New Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wesdome Gold and New Gold

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

The idea behind Wesdome Gold Mines and New Gold 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.