Correlation Between Euro Sun and Wesdome Gold

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

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

Diversification Opportunities for Euro Sun and Wesdome Gold

0.73

Correlation Coefficient

Euro Sun  Wesdome Gold

Poor diversification

The 3 months correlation between Euro and Wesdome is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Euro Sun Mining and Wesdome Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesdome Gold Mines and Euro Sun 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 Euro Sun Mining are associated (or correlated) with Wesdome Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesdome Gold Mines has no effect on the direction of Euro Sun i.e., Euro Sun and Wesdome Gold go up and down completely randomly.

Pair Corralation between Euro Sun and Wesdome Gold

Assuming the 90 days trading horizon Euro Sun Mining is expected to generate 4.6 times more return on investment than Wesdome Gold. However, Euro Sun is 4.6 times more volatile than Wesdome Gold Mines. It trades about 0.17 of its potential returns per unit of risk. Wesdome Gold Mines is currently generating about 0.19 per unit of risk. If you would invest  4.50  in Euro Sun Mining on January 20, 2024 and sell it today you would earn a total of  1.50  from holding Euro Sun Mining or generate 33.33% return on investment over 90 days.

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

Euro Sun Mining  vs.  Wesdome Gold Mines

Euro Sun Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Sun Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Euro Sun displayed solid returns over the last few months and may actually be approaching a breakup point.

Wesdome Gold Mines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wesdome Gold Mines are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Wesdome Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euro Sun and Wesdome Gold

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

The idea behind Euro Sun Mining and Wesdome Gold Mines 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.