Correlation Between First Mining and Cerrado Gold
Can any of the company-specific risk be diversified away by investing in both First Mining and Cerrado 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 First Mining and Cerrado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Mining Gold and Cerrado Gold, you can compare the effects of market volatilities on First Mining and Cerrado 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 First Mining with a short position of Cerrado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Mining and Cerrado Gold.
Diversification Opportunities for First Mining and Cerrado Gold
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Cerrado is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding First Mining Gold and Cerrado Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerrado Gold and First Mining 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 First Mining Gold are associated (or correlated) with Cerrado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerrado Gold has no effect on the direction of First Mining i.e., First Mining and Cerrado Gold go up and down completely randomly.
Pair Corralation between First Mining and Cerrado Gold
Assuming the 90 days horizon First Mining Gold is expected to generate 0.99 times more return on investment than Cerrado Gold. However, First Mining Gold is 1.01 times less risky than Cerrado Gold. It trades about -0.04 of its potential returns per unit of risk. Cerrado Gold is currently generating about -0.09 per unit of risk. If you would invest 10.00 in First Mining Gold on September 2, 2024 and sell it today you would lose (0.60) from holding First Mining Gold or give up 6.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Mining Gold vs. Cerrado Gold
Performance |
| Timeline |
| First Mining Gold |
| Cerrado Gold |
First Mining and Cerrado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Mining and Cerrado Gold
The main advantage of trading using opposite First Mining and Cerrado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Mining position performs unexpectedly, Cerrado 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 Cerrado Gold will offset losses from the drop in Cerrado Gold's long position.| First Mining vs. South32 Limited | First Mining vs. NioCorp Developments Ltd | First Mining vs. HUMANA INC | First Mining vs. SCOR PK |
| Cerrado Gold vs. Aurion Resources | Cerrado Gold vs. Rio2 Limited | Cerrado Gold vs. Palamina Corp | Cerrado Gold vs. BTU Metals Corp |
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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