Correlation Between Gold Royalty and Sierra Madre
Can any of the company-specific risk be diversified away by investing in both Gold Royalty and Sierra Madre 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 Royalty and Sierra Madre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Royalty Corp and Sierra Madre Gold, you can compare the effects of market volatilities on Gold Royalty and Sierra Madre 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 Royalty with a short position of Sierra Madre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Royalty and Sierra Madre.
Diversification Opportunities for Gold Royalty and Sierra Madre
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gold and Sierra is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gold Royalty Corp and Sierra Madre Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Madre Gold and Gold Royalty 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 Royalty Corp are associated (or correlated) with Sierra Madre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Madre Gold has no effect on the direction of Gold Royalty i.e., Gold Royalty and Sierra Madre go up and down completely randomly.
Pair Corralation between Gold Royalty and Sierra Madre
Given the investment horizon of 90 days Gold Royalty Corp is expected to under-perform the Sierra Madre. But the stock apears to be less risky and, when comparing its historical volatility, Gold Royalty Corp is 2.01 times less risky than Sierra Madre. The stock trades about -0.03 of its potential returns per unit of risk. The Sierra Madre Gold is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 56.00 in Sierra Madre Gold on September 3, 2024 and sell it today you would lose (26.00) from holding Sierra Madre Gold or give up 46.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Royalty Corp vs. Sierra Madre Gold
Performance |
| Timeline |
| Gold Royalty Corp |
| Sierra Madre Gold |
Gold Royalty and Sierra Madre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Royalty and Sierra Madre
The main advantage of trading using opposite Gold Royalty and Sierra Madre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Royalty position performs unexpectedly, Sierra Madre 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 Sierra Madre will offset losses from the drop in Sierra Madre's long position.| Gold Royalty vs. Endeavour Silver Corp | Gold Royalty vs. SilverCrest Metals | Gold Royalty vs. Platinum Group Metals | Gold Royalty vs. New Pacific Metals |
| Sierra Madre vs. Equity Metals | Sierra Madre vs. Silver Wolf Exploration | Sierra Madre vs. Western Alaska Minerals | Sierra Madre vs. Summa Silver 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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