Correlation Between Western Alaska and P2 Gold

Can any of the company-specific risk be diversified away by investing in both Western Alaska and P2 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 Western Alaska and P2 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Alaska Minerals and P2 Gold, you can compare the effects of market volatilities on Western Alaska and P2 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 Western Alaska with a short position of P2 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Alaska and P2 Gold.

Diversification Opportunities for Western Alaska and P2 Gold

0.34

Correlation Coefficient

Western Alaska  P2 Gold

Weak diversification

The 3 months correlation between Western and PGLDF is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Western Alaska Minerals and P2 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on P2 Gold and Western Alaska 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 Western Alaska Minerals are associated (or correlated) with P2 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of P2 Gold has no effect on the direction of Western Alaska i.e., Western Alaska and P2 Gold go up and down completely randomly.

Pair Corralation between Western Alaska and P2 Gold

Assuming the 90 days horizon Western Alaska Minerals is expected to under-perform the P2 Gold. In addition to that, Western Alaska is 1.04 times more volatile than P2 Gold. It trades about -0.01 of its total potential returns per unit of risk. P2 Gold is currently generating about 0.07 per unit of volatility. If you would invest  4.40  in P2 Gold on August 31, 2024 and sell it today you would earn a total of  0.70  from holding P2 Gold or generate 15.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Western Alaska Minerals  vs.  P2 Gold

Western Alaska Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Alaska Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Western Alaska is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

P2 Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in P2 Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, P2 Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Alaska and P2 Gold

The main advantage of trading using opposite Western Alaska and P2 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alaska position performs unexpectedly, P2 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 P2 Gold will offset losses from the drop in P2 Gold's long position.

The idea behind Western Alaska Minerals and P2 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.