Correlation Between Cerrado Gold and Red Pine
Can any of the company-specific risk be diversified away by investing in both Cerrado Gold and Red Pine 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 Cerrado Gold and Red Pine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cerrado Gold and Red Pine Exploration, you can compare the effects of market volatilities on Cerrado Gold and Red Pine 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 Cerrado Gold with a short position of Red Pine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cerrado Gold and Red Pine.
Diversification Opportunities for Cerrado Gold and Red Pine
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cerrado and Red is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cerrado Gold and Red Pine Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Pine Exploration and Cerrado 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 Cerrado Gold are associated (or correlated) with Red Pine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Pine Exploration has no effect on the direction of Cerrado Gold i.e., Cerrado Gold and Red Pine go up and down completely randomly.
Pair Corralation between Cerrado Gold and Red Pine
Assuming the 90 days horizon Cerrado Gold is expected to generate 1.55 times more return on investment than Red Pine. However, Cerrado Gold is 1.55 times more volatile than Red Pine Exploration. It trades about 0.05 of its potential returns per unit of risk. Red Pine Exploration is currently generating about 0.01 per unit of risk. If you would invest 26.00 in Cerrado Gold on August 29, 2024 and sell it today you would lose (1.00) from holding Cerrado Gold or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Cerrado Gold vs. Red Pine Exploration
Performance |
| Timeline |
| Cerrado Gold |
| Red Pine Exploration |
Cerrado Gold and Red Pine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cerrado Gold and Red Pine
The main advantage of trading using opposite Cerrado Gold and Red Pine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cerrado Gold position performs unexpectedly, Red Pine 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 Red Pine will offset losses from the drop in Red Pine's long position.| Cerrado Gold vs. Vertiv Holdings Co | Cerrado Gold vs. Nasdaq Inc | Cerrado Gold vs. McDonalds | Cerrado Gold vs. Walmart |
| Red Pine vs. Silver Hammer Mining | Red Pine vs. Reyna Silver Corp | Red Pine vs. Guanajuato Silver | Red Pine vs. Silver One Resources |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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