Correlation Between US Gold and New World
Can any of the company-specific risk be diversified away by investing in both US Gold and New World 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 US Gold and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Gold Corp and New World Gold, you can compare the effects of market volatilities on US Gold and New World 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 US Gold with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Gold and New World.
Diversification Opportunities for US Gold and New World
Good diversification
The 3 months correlation between USAU and New is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and New World Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Gold and US 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 US Gold Corp are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Gold has no effect on the direction of US Gold i.e., US Gold and New World go up and down completely randomly.
Pair Corralation between US Gold and New World
Given the investment horizon of 90 days US Gold is expected to generate 62.01 times less return on investment than New World. But when comparing it to its historical volatility, US Gold Corp is 23.3 times less risky than New World. It trades about 0.04 of its potential returns per unit of risk. New World Gold is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.01 in New World Gold on September 13, 2024 and sell it today you would lose (0.01) from holding New World Gold or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Gold Corp vs. New World Gold
Performance |
| Timeline |
| US Gold Corp |
| New World Gold |
US Gold and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Gold and New World
The main advantage of trading using opposite US Gold and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Gold position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| US Gold vs. Labrador Gold Corp | US Gold vs. Aurion Resources | US Gold vs. Puma Exploration | US Gold vs. Golden Star Resource |
| New World vs. Revival Gold | New World vs. Galiano Gold | New World vs. US Gold Corp | New World 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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