Correlation Between GoldMining and Gold Resource

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Can any of the company-specific risk be diversified away by investing in both GoldMining and Gold Resource 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 GoldMining and Gold Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Gold Resource, you can compare the effects of market volatilities on GoldMining and Gold Resource 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 GoldMining with a short position of Gold Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Gold Resource.

Diversification Opportunities for GoldMining and Gold Resource

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between GoldMining and Gold is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource and GoldMining 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 GoldMining are associated (or correlated) with Gold Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of GoldMining i.e., GoldMining and Gold Resource go up and down completely randomly.

Pair Corralation between GoldMining and Gold Resource

Given the investment horizon of 90 days GoldMining is expected to generate 0.45 times more return on investment than Gold Resource. However, GoldMining is 2.2 times less risky than Gold Resource. It trades about -0.02 of its potential returns per unit of risk. Gold Resource is currently generating about -0.04 per unit of risk. If you would invest  130.00  in GoldMining on August 30, 2024 and sell it today you would lose (46.00) from holding GoldMining or give up 35.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

GoldMining  vs.  Gold Resource

 Performance 
       Timeline  
GoldMining 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, GoldMining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Gold Resource 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gold Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

GoldMining and Gold Resource Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GoldMining and Gold Resource

The main advantage of trading using opposite GoldMining and Gold Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining position performs unexpectedly, Gold Resource 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 Resource will offset losses from the drop in Gold Resource's long position.
The idea behind GoldMining and Gold Resource 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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