Correlation Between St James and Cerrado Gold
Can any of the company-specific risk be diversified away by investing in both St James 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 St James and Cerrado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between St James Gold and Cerrado Gold, you can compare the effects of market volatilities on St James 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 St James with a short position of Cerrado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of St James and Cerrado Gold.
Diversification Opportunities for St James and Cerrado Gold
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LRDJF and Cerrado is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding St James Gold and Cerrado Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerrado Gold and St James 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 St James 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 St James i.e., St James and Cerrado Gold go up and down completely randomly.
Pair Corralation between St James and Cerrado Gold
Assuming the 90 days horizon St James Gold is expected to generate 1.92 times more return on investment than Cerrado Gold. However, St James is 1.92 times more volatile than Cerrado Gold. It trades about 0.03 of its potential returns per unit of risk. Cerrado Gold is currently generating about -0.01 per unit of risk. If you would invest 7.44 in St James Gold on September 14, 2024 and sell it today you would lose (0.24) from holding St James Gold or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
St James Gold vs. Cerrado Gold
Performance |
| Timeline |
| St James Gold |
| Cerrado Gold |
St James and Cerrado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with St James and Cerrado Gold
The main advantage of trading using opposite St James and Cerrado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if St James 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.The idea behind St James Gold and Cerrado 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.| Cerrado Gold vs. Revival Gold | Cerrado Gold vs. Galiano Gold | Cerrado Gold vs. US Gold Corp | Cerrado Gold vs. HUMANA INC |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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