Correlation Between Wesdome Gold and Northern Star

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

Diversification Opportunities for Wesdome Gold and Northern Star

0.8

Correlation Coefficient

Wesdome Gold  Northern Star

Very poor diversification

The 3 months correlation between Wesdome and Northern is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star 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 Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Wesdome Gold i.e., Wesdome Gold and Northern Star go up and down completely randomly.

Pair Corralation between Wesdome Gold and Northern Star

Assuming the 90 days horizon Wesdome Gold Mines is expected to generate 0.93 times more return on investment than Northern Star. However, Wesdome Gold Mines is 1.07 times less risky than Northern Star. It trades about 0.22 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.13 per unit of risk. If you would invest  878.00  in Wesdome Gold Mines on December 30, 2024 and sell it today you would earn a total of  297.00  from holding Wesdome Gold Mines or generate 33.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Wesdome Gold Mines  vs.  Northern Star Resources

Wesdome Gold Mines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wesdome Gold Mines are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Wesdome Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Northern Star Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northern Star reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wesdome Gold and Northern Star

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

The idea behind Wesdome Gold Mines and Northern Star 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.