Correlation Between 1WO and Gold Fields

Can any of the company-specific risk be diversified away by investing in both 1WO and Gold Fields 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 1WO and Gold Fields into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1WO and Goldfinch, you can compare the effects of market volatilities on 1WO and Gold Fields 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 1WO with a short position of Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1WO and Gold Fields.

Diversification Opportunities for 1WO and Gold Fields

-0.8

Correlation Coefficient

1WO  Gold Fields

Pay attention - limited upside

The 3 months correlation between 1WO and Gold is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding 1WO and Goldfinch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields and 1WO 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 1WO are associated (or correlated) with Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of 1WO i.e., 1WO and Gold Fields go up and down completely randomly.

Pair Corralation between 1WO and Gold Fields

Assuming the 90 days trading horizon 1WO is expected to generate 2.93 times less return on investment than Gold Fields. But when comparing it to its historical volatility, 1WO is 2.72 times less risky than Gold Fields. It trades about 0.08 of its potential returns per unit of risk. Goldfinch is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Goldfinch on January 30, 2024 and sell it today you would earn a total of  260.00  from holding Goldfinch or generate 406.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	57.97%
Values	Daily Returns

1WO  vs.  Goldfinch

1WO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1WO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 1WO is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gold Fields

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldfinch are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Gold Fields exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1WO and Gold Fields

The main advantage of trading using opposite 1WO and Gold Fields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1WO position performs unexpectedly, Gold Fields 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 Gold Fields will offset losses from the drop in Gold Fields' long position.

The idea behind 1WO and Goldfinch 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.