Correlation Between Orezone Gold and Western Forest
Can any of the company-specific risk be diversified away by investing in both Orezone Gold and Western Forest 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 Orezone Gold and Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orezone Gold Corp and Western Forest Products, you can compare the effects of market volatilities on Orezone Gold and Western Forest 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 Orezone Gold with a short position of Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orezone Gold and Western Forest.
Diversification Opportunities for Orezone Gold and Western Forest
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orezone and Western is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Orezone Gold Corp and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products and Orezone 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 Orezone Gold Corp are associated (or correlated) with Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Orezone Gold i.e., Orezone Gold and Western Forest go up and down completely randomly.
Pair Corralation between Orezone Gold and Western Forest
Assuming the 90 days trading horizon Orezone Gold Corp is expected to generate 1.06 times more return on investment than Western Forest. However, Orezone Gold is 1.06 times more volatile than Western Forest Products. It trades about 0.04 of its potential returns per unit of risk. Western Forest Products is currently generating about 0.02 per unit of risk. If you would invest 67.00 in Orezone Gold Corp on September 6, 2024 and sell it today you would earn a total of 4.00 from holding Orezone Gold Corp or generate 5.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Orezone Gold Corp vs. Western Forest Products
Performance |
Timeline |
Orezone Gold Corp |
Western Forest Products |
Orezone Gold and Western Forest Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Orezone Gold and Western Forest
The main advantage of trading using opposite Orezone Gold and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orezone Gold position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.Orezone Gold vs. i 80 Gold Corp | Orezone Gold vs. Perseus Mining | Orezone Gold vs. K92 Mining | Orezone Gold vs. GoGold Resources |
Western Forest vs. Interfor Corp | Western Forest vs. Canfor | Western Forest vs. West Fraser Timber | Western Forest vs. Stella Jones |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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