Correlation Between Wesdome Gold and Blue Lagoon

Can any of the company-specific risk be diversified away by investing in both Wesdome Gold and Blue Lagoon 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 Blue Lagoon 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 Blue Lagoon Resources, you can compare the effects of market volatilities on Wesdome Gold and Blue Lagoon 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 Blue Lagoon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesdome Gold and Blue Lagoon.

Diversification Opportunities for Wesdome Gold and Blue Lagoon

0.17

Correlation Coefficient

Wesdome Gold  Blue Lagoon

Average diversification

The 3 months correlation between Wesdome and Blue is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines and Blue Lagoon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Lagoon Resources 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 Blue Lagoon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Lagoon Resources has no effect on the direction of Wesdome Gold i.e., Wesdome Gold and Blue Lagoon go up and down completely randomly.

Pair Corralation between Wesdome Gold and Blue Lagoon

Assuming the 90 days horizon Wesdome Gold Mines is expected to generate 0.35 times more return on investment than Blue Lagoon. However, Wesdome Gold Mines is 2.89 times less risky than Blue Lagoon. It trades about 0.02 of its potential returns per unit of risk. Blue Lagoon Resources is currently generating about -0.2 per unit of risk. If you would invest  873.00  in Wesdome Gold Mines on October 2, 2024 and sell it today you would earn a total of  5.00  from holding Wesdome Gold Mines or generate 0.57% return on investment over 90 days.

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

Wesdome Gold Mines  vs.  Blue Lagoon Resources

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. Despite nearly stable technical and fundamental indicators, Wesdome Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Blue Lagoon Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Lagoon Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Blue Lagoon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wesdome Gold and Blue Lagoon

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

The idea behind Wesdome Gold Mines and Blue Lagoon 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.