Correlation Between Gold Fields and St James
Can any of the company-specific risk be diversified away by investing in both Gold Fields and St James 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 Gold Fields and St James into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and St James Gold, you can compare the effects of market volatilities on Gold Fields and St James 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 Gold Fields with a short position of St James. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and St James.
Diversification Opportunities for Gold Fields and St James
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gold and LRDJF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and St James Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St James Gold and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with St James. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St James Gold has no effect on the direction of Gold Fields i.e., Gold Fields and St James go up and down completely randomly.
Pair Corralation between Gold Fields and St James
Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.32 times more return on investment than St James. However, Gold Fields Ltd is 3.09 times less risky than St James. It trades about -0.23 of its potential returns per unit of risk. St James Gold is currently generating about -0.19 per unit of risk. If you would invest 1,724 in Gold Fields Ltd on August 29, 2024 and sell it today you would lose (253.00) from holding Gold Fields Ltd or give up 14.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. St James Gold
Performance |
| Timeline |
| Gold Fields |
| St James Gold |
Gold Fields and St James Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and St James
The main advantage of trading using opposite Gold Fields and St James positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields position performs unexpectedly, St James 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 St James will offset losses from the drop in St James' long position.The idea behind Gold Fields Ltd and St James 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.| St James vs. Aurion Resources | St James vs. Liberty Gold Corp | St James vs. Orezone Gold Corp | St James vs. Fortuna Silver Mines |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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