Correlation Between New World and Big Ridge

Can any of the company-specific risk be diversified away by investing in both New World and Big Ridge 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 New World and Big Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for New World and Big Ridge

0.0

Correlation Coefficient

New World  Big Ridge

Pay attention - limited upside

The 3 months correlation between New and Big is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding New World Gold and Big Ridge Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Ridge Gold and New World 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 New World Gold are associated (or correlated) with Big Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Ridge Gold has no effect on the direction of New World i.e., New World and Big Ridge go up and down completely randomly.

Pair Corralation between New World and Big Ridge

Given the investment horizon of 90 days New World Gold is expected to generate 11.05 times more return on investment than Big Ridge. However, New World is 11.05 times more volatile than Big Ridge Gold. It trades about 0.15 of its potential returns per unit of risk. Big Ridge Gold is currently generating about 0.06 per unit of risk. If you would invest  0.00  in New World Gold on September 15, 2024 and sell it today you would earn a total of  0.01  from holding New World Gold or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

New World Gold  vs.  Big Ridge Gold

New World Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New World Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, New World is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Big Ridge Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Big Ridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New World and Big Ridge

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

The idea behind New World Gold and Big Ridge Gold 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 CEOs Directory module to screen CEOs from public companies around the world.