Correlation Between Wesdome Gold and South32

Can any of the company-specific risk be diversified away by investing in both Wesdome Gold and South32 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 South32 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 South32 Limited, you can compare the effects of market volatilities on Wesdome Gold and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesdome Gold and South32.

Diversification Opportunities for Wesdome Gold and South32

0.39

Correlation Coefficient

Wesdome Gold  South32

Weak diversification

The 3 months correlation between Wesdome and South32 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Wesdome Gold i.e., Wesdome Gold and South32 go up and down completely randomly.

Pair Corralation between Wesdome Gold and South32

Assuming the 90 days horizon Wesdome Gold Mines is expected to generate 0.86 times more return on investment than South32. However, Wesdome Gold Mines is 1.16 times less risky than South32. It trades about 0.22 of its potential returns per unit of risk. South32 Limited is currently generating about -0.04 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Wesdome Gold Mines  vs.  South32 Limited

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.

South32 Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days South32 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, South32 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wesdome Gold and South32

The main advantage of trading using opposite Wesdome Gold and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesdome Gold position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.

The idea behind Wesdome Gold Mines and South32 Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.