Correlation Between Westward Gold and American Pacific

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

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

Diversification Opportunities for Westward Gold and American Pacific

0.31

Correlation Coefficient

Westward Gold  American Pacific

Weak diversification

The 3 months correlation between Westward and American is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Westward Gold and American Pacific Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Pacific Mining and Westward 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 Westward Gold are associated (or correlated) with American Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Pacific Mining has no effect on the direction of Westward Gold i.e., Westward Gold and American Pacific go up and down completely randomly.

Pair Corralation between Westward Gold and American Pacific

Assuming the 90 days horizon Westward Gold is expected to under-perform the American Pacific. In addition to that, Westward Gold is 1.1 times more volatile than American Pacific Mining. It trades about 0.0 of its total potential returns per unit of risk. American Pacific Mining is currently generating about 0.0 per unit of volatility. If you would invest  18.00  in American Pacific Mining on November 20, 2024 and sell it today you would lose (2.00) from holding American Pacific Mining or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Westward Gold  vs.  American Pacific Mining

Westward Gold

Risk-Adjusted Performance

Insignificant

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

American Pacific Mining

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Westward Gold and American Pacific

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

The idea behind Westward Gold and American Pacific Mining 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.