Correlation Between Royal Gold and Gold Fields
Can any of the company-specific risk be diversified away by investing in both Royal Gold and Gold Fields 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 Royal Gold and Gold Fields into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Gold and Gold Fields Ltd, you can compare the effects of market volatilities on Royal Gold and Gold Fields 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 Royal Gold with a short position of Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Gold and Gold Fields.
Diversification Opportunities for Royal Gold and Gold Fields
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Royal and Gold is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields and Royal Gold 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 Royal Gold are associated (or correlated) with Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Royal Gold i.e., Royal Gold and Gold Fields go up and down completely randomly.
Pair Corralation between Royal Gold and Gold Fields
Given the investment horizon of 90 days Royal Gold is expected to generate 0.53 times more return on investment than Gold Fields. However, Royal Gold is 1.89 times less risky than Gold Fields. It trades about 0.04 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about -0.01 per unit of risk. If you would invest 14,608 in Royal Gold on August 26, 2024 and sell it today you would earn a total of 291.00 from holding Royal Gold or generate 1.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Gold vs. Gold Fields Ltd
Performance |
| Timeline |
| Royal Gold |
| Gold Fields |
Royal Gold and Gold Fields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Gold and Gold Fields
The main advantage of trading using opposite Royal Gold and Gold Fields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Gold position performs unexpectedly, Gold Fields 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 Gold Fields will offset losses from the drop in Gold Fields' long position.| Royal Gold vs. Wheaton Precious Metals | Royal Gold vs. Agnico Eagle Mines | Royal Gold vs. Sandstorm Gold Ltd | Royal Gold vs. Osisko Gold Ro |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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