Correlation Between George Weston and Spanish Mountain

Can any of the company-specific risk be diversified away by investing in both George Weston and Spanish Mountain 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 George Weston and Spanish Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between George Weston Limited and Spanish Mountain Gold, you can compare the effects of market volatilities on George Weston and Spanish Mountain 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 George Weston with a short position of Spanish Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of George Weston and Spanish Mountain.

Diversification Opportunities for George Weston and Spanish Mountain

-0.36

Correlation Coefficient

George Weston  Spanish Mountain

Very good diversification

The 3 months correlation between George and Spanish is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding George Weston Limited and Spanish Mountain Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spanish Mountain Gold and George Weston 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 George Weston Limited are associated (or correlated) with Spanish Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spanish Mountain Gold has no effect on the direction of George Weston i.e., George Weston and Spanish Mountain go up and down completely randomly.

Pair Corralation between George Weston and Spanish Mountain

Assuming the 90 days horizon George Weston Limited is expected to generate 0.26 times more return on investment than Spanish Mountain. However, George Weston Limited is 3.79 times less risky than Spanish Mountain. It trades about 0.1 of its potential returns per unit of risk. Spanish Mountain Gold is currently generating about -0.02 per unit of risk. If you would invest  16,051  in George Weston Limited on September 14, 2024 and sell it today you would earn a total of  7,745  from holding George Weston Limited or generate 48.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.75%
Values	Daily Returns

George Weston Limited  vs.  Spanish Mountain Gold

George Weston Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Spanish Mountain Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spanish Mountain Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with George Weston and Spanish Mountain

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

The idea behind George Weston Limited and Spanish Mountain 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.