Correlation Between Lotus Resources and Eminent Gold
Can any of the company-specific risk be diversified away by investing in both Lotus Resources and Eminent 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 Lotus Resources and Eminent Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotus Resources Limited and Eminent Gold Corp, you can compare the effects of market volatilities on Lotus Resources and Eminent 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 Lotus Resources with a short position of Eminent Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Resources and Eminent Gold.
Diversification Opportunities for Lotus Resources and Eminent Gold
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lotus and Eminent is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Resources Limited and Eminent Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eminent Gold Corp and Lotus 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 Lotus Resources Limited are associated (or correlated) with Eminent Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eminent Gold Corp has no effect on the direction of Lotus Resources i.e., Lotus Resources and Eminent Gold go up and down completely randomly.
Pair Corralation between Lotus Resources and Eminent Gold
Assuming the 90 days horizon Lotus Resources is expected to generate 1.36 times less return on investment than Eminent Gold. But when comparing it to its historical volatility, Lotus Resources Limited is 1.23 times less risky than Eminent Gold. It trades about 0.02 of its potential returns per unit of risk. Eminent Gold Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Eminent Gold Corp on December 5, 2024 and sell it today you would lose (5.00) from holding Eminent Gold Corp or give up 17.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Lotus Resources Limited vs. Eminent Gold Corp
Performance |
| Timeline |
| Lotus Resources |
| Eminent Gold Corp |
Lotus Resources and Eminent Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotus Resources and Eminent Gold
The main advantage of trading using opposite Lotus Resources and Eminent Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotus Resources position performs unexpectedly, Eminent 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 Eminent Gold will offset losses from the drop in Eminent Gold's long position.| Lotus Resources vs. Golden Goliath Resources | ||
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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