Correlation Between US Gold and Prime Meridian
Can any of the company-specific risk be diversified away by investing in both US Gold and Prime Meridian 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 Prime Meridian 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 Prime Meridian Resources, you can compare the effects of market volatilities on US Gold and Prime Meridian 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 Prime Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Gold and Prime Meridian.
Diversification Opportunities for US Gold and Prime Meridian
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between USAU and Prime is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Prime Meridian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Meridian Resources 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 Prime Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Meridian Resources has no effect on the direction of US Gold i.e., US Gold and Prime Meridian go up and down completely randomly.
Pair Corralation between US Gold and Prime Meridian
Given the investment horizon of 90 days US Gold is expected to generate 2.59 times less return on investment than Prime Meridian. But when comparing it to its historical volatility, US Gold Corp is 3.8 times less risky than Prime Meridian. It trades about 0.05 of its potential returns per unit of risk. Prime Meridian Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8.69 in Prime Meridian Resources on September 12, 2024 and sell it today you would lose (1.69) from holding Prime Meridian Resources or give up 19.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
US Gold Corp vs. Prime Meridian Resources
Performance |
| Timeline |
| US Gold Corp |
| Prime Meridian Resources |
US Gold and Prime Meridian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Gold and Prime Meridian
The main advantage of trading using opposite US Gold and Prime Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Gold position performs unexpectedly, Prime Meridian 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 Prime Meridian will offset losses from the drop in Prime Meridian'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 |
| Prime Meridian vs. Revival Gold | Prime Meridian vs. Galiano Gold | Prime Meridian vs. US Gold Corp | Prime Meridian 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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