Correlation Between Royal Gold and Gold Resource
Can any of the company-specific risk be diversified away by investing in both Royal Gold and Gold Resource 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 Resource 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 Resource, you can compare the effects of market volatilities on Royal Gold and Gold Resource 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 Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Gold and Gold Resource.
Diversification Opportunities for Royal Gold and Gold Resource
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and Gold is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource 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 Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of Royal Gold i.e., Royal Gold and Gold Resource go up and down completely randomly.
Pair Corralation between Royal Gold and Gold Resource
Given the investment horizon of 90 days Royal Gold is expected to generate 2.55 times less return on investment than Gold Resource. But when comparing it to its historical volatility, Royal Gold is 3.63 times less risky than Gold Resource. It trades about 0.17 of its potential returns per unit of risk. Gold Resource is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Gold Resource on September 13, 2024 and sell it today you would earn a total of 2.00 from holding Gold Resource or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Gold vs. Gold Resource
Performance |
| Timeline |
| Royal Gold |
| Gold Resource |
Royal Gold and Gold Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Gold and Gold Resource
The main advantage of trading using opposite Royal Gold and Gold Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Gold position performs unexpectedly, Gold Resource 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 Resource will offset losses from the drop in Gold Resource's 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 |
| Gold Resource vs. IAMGold | Gold Resource vs. Eldorado Gold Corp | Gold Resource vs. Coeur Mining | Gold Resource vs. Alamos 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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