Correlation Between Red 5 and Cerrado Gold
Can any of the company-specific risk be diversified away by investing in both Red 5 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 Red 5 and Cerrado Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red 5 Limited and Cerrado Gold, you can compare the effects of market volatilities on Red 5 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 Red 5 with a short position of Cerrado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red 5 and Cerrado Gold.
Diversification Opportunities for Red 5 and Cerrado Gold
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Red and Cerrado is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Red 5 Limited and Cerrado Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerrado Gold and Red 5 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 Red 5 Limited 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 Red 5 i.e., Red 5 and Cerrado Gold go up and down completely randomly.
Pair Corralation between Red 5 and Cerrado Gold
Assuming the 90 days horizon Red 5 is expected to generate 4.19 times less return on investment than Cerrado Gold. But when comparing it to its historical volatility, Red 5 Limited is 2.26 times less risky than Cerrado Gold. It trades about 0.03 of its potential returns per unit of risk. Cerrado Gold is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 22.00 in Cerrado Gold on November 3, 2024 and sell it today you would earn a total of 9.00 from holding Cerrado Gold or generate 40.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Red 5 Limited vs. Cerrado Gold
Performance |
| Timeline |
| Red 5 Limited |
| Cerrado Gold |
Red 5 and Cerrado Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red 5 and Cerrado Gold
The main advantage of trading using opposite Red 5 and Cerrado Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red 5 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.| Red 5 vs. Cerrado Gold | Red 5 vs. First Mining Gold | Red 5 vs. American Pacific Mining | Red 5 vs. Cache Exploration |
| Cerrado Gold vs. Antioquia Gold | Cerrado Gold vs. Red Pine Exploration | Cerrado Gold vs. Bellevue Gold Limited | Cerrado Gold vs. Asante Gold |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |