Correlation Between Wolfden Resources and Volcanic Gold

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

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

Diversification Opportunities for Wolfden Resources and Volcanic Gold

0.02

Correlation Coefficient

Wolfden Resources  Volcanic Gold

Significant diversification

The 3 months correlation between Wolfden and Volcanic is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Wolfden Resources and Volcanic Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volcanic Gold Mines and Wolfden Resources 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 Wolfden Resources are associated (or correlated) with Volcanic Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volcanic Gold Mines has no effect on the direction of Wolfden Resources i.e., Wolfden Resources and Volcanic Gold go up and down completely randomly.

Pair Corralation between Wolfden Resources and Volcanic Gold

Assuming the 90 days horizon Wolfden Resources is expected to generate 3.41 times more return on investment than Volcanic Gold. However, Wolfden Resources is 3.41 times more volatile than Volcanic Gold Mines. It trades about 0.16 of its potential returns per unit of risk. Volcanic Gold Mines is currently generating about 0.08 per unit of risk. If you would invest  2.07  in Wolfden Resources on September 22, 2024 and sell it today you would earn a total of  1.93  from holding Wolfden Resources or generate 93.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Wolfden Resources  vs.  Volcanic Gold Mines

Wolfden Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfden Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Wolfden Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Volcanic Gold Mines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Volcanic Gold Mines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Volcanic Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wolfden Resources and Volcanic Gold

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

The idea behind Wolfden Resources and Volcanic 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .