Correlation Between West Red and Equinox Gold

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

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

Diversification Opportunities for West Red and Equinox Gold

0.39

Correlation Coefficient

West Red  Equinox Gold

Weak diversification

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

Pair Corralation between West Red and Equinox Gold

Assuming the 90 days horizon West Red Lake is expected to generate 0.89 times more return on investment than Equinox Gold. However, West Red Lake is 1.12 times less risky than Equinox Gold. It trades about 0.08 of its potential returns per unit of risk. Equinox Gold Corp is currently generating about -0.01 per unit of risk. If you would invest  40.00  in West Red Lake on October 11, 2024 and sell it today you would earn a total of  2.00  from holding West Red Lake or generate 5.0% return on investment over 90 days.

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

West Red Lake  vs.  Equinox Gold Corp

West Red Lake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Red Lake has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Equinox Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equinox Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Equinox Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with West Red and Equinox Gold

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

The idea behind West Red Lake and Equinox Gold Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.