Correlation Between Wesdome Gold and Treasury Metals

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

Diversification Opportunities for Wesdome Gold and Treasury Metals

0.82

Correlation Coefficient

Wesdome Gold  Treasury Metals

Very poor diversification

The 3 months correlation between Wesdome and Treasury is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines and Treasury Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Metals 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 Treasury Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Metals has no effect on the direction of Wesdome Gold i.e., Wesdome Gold and Treasury Metals go up and down completely randomly.

Pair Corralation between Wesdome Gold and Treasury Metals

Assuming the 90 days horizon Wesdome Gold is expected to generate 2.6 times less return on investment than Treasury Metals. But when comparing it to its historical volatility, Wesdome Gold Mines is 2.17 times less risky than Treasury Metals. It trades about 0.17 of its potential returns per unit of risk. Treasury Metals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Treasury Metals on February 19, 2024 and sell it today you would earn a total of  9.00  from holding Treasury Metals or generate 100.0% return on investment over 90 days.

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

Wesdome Gold Mines  vs.  Treasury Metals

Wesdome Gold Mines

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wesdome Gold Mines are ranked lower than 13 (%) 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.

Treasury Metals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Treasury Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wesdome Gold and Treasury Metals

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

The idea behind Wesdome Gold Mines and Treasury Metals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.