Correlation Between Loncor Resources and TRX Gold
Can any of the company-specific risk be diversified away by investing in both Loncor Resources and TRX 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 Loncor Resources and TRX Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loncor Resources and TRX Gold Corp, you can compare the effects of market volatilities on Loncor Resources and TRX 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 Loncor Resources with a short position of TRX Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loncor Resources and TRX Gold.
Diversification Opportunities for Loncor Resources and TRX Gold
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Loncor and TRX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Loncor Resources and TRX Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRX Gold Corp and Loncor Resources 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 Loncor Resources are associated (or correlated) with TRX Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRX Gold Corp has no effect on the direction of Loncor Resources i.e., Loncor Resources and TRX Gold go up and down completely randomly.
Pair Corralation between Loncor Resources and TRX Gold
Assuming the 90 days horizon Loncor Resources is expected to generate 68.63 times less return on investment than TRX Gold. But when comparing it to its historical volatility, Loncor Resources is 23.82 times less risky than TRX Gold. It trades about 0.03 of its potential returns per unit of risk. TRX Gold Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 43.00 in TRX Gold Corp on September 1, 2024 and sell it today you would earn a total of 4,199 from holding TRX Gold Corp or generate 9765.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Loncor Resources vs. TRX Gold Corp
Performance |
| Timeline |
| Loncor Resources |
| TRX Gold Corp |
Loncor Resources and TRX Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loncor Resources and TRX Gold
The main advantage of trading using opposite Loncor Resources and TRX Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loncor Resources position performs unexpectedly, TRX 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 TRX Gold will offset losses from the drop in TRX Gold's long position.| Loncor Resources vs. First Majestic Silver | Loncor Resources vs. Ivanhoe Energy | Loncor Resources vs. Orezone Gold Corp | Loncor Resources vs. Faraday Copper Corp |
| TRX Gold vs. First Majestic Silver | TRX Gold vs. Ivanhoe Energy | TRX Gold vs. Orezone Gold Corp | TRX Gold vs. Faraday Copper 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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