Correlation Between AMG Advanced and GoldMining

Can any of the company-specific risk be diversified away by investing in both AMG Advanced and GoldMining 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 AMG Advanced and GoldMining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AMG Advanced Metallurgical and GoldMining, you can compare the effects of market volatilities on AMG Advanced and GoldMining 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 AMG Advanced with a short position of GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMG Advanced and GoldMining.

Diversification Opportunities for AMG Advanced and GoldMining

0.06

Correlation Coefficient

AMG Advanced  GoldMining

Significant diversification

The 3 months correlation between AMG and GoldMining is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AMG Advanced Metallurgical and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and AMG Advanced 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 AMG Advanced Metallurgical are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of AMG Advanced i.e., AMG Advanced and GoldMining go up and down completely randomly.

Pair Corralation between AMG Advanced and GoldMining

Assuming the 90 days trading horizon AMG Advanced Metallurgical is expected to under-perform the GoldMining. But the stock apears to be less risky and, when comparing its historical volatility, AMG Advanced Metallurgical is 1.62 times less risky than GoldMining. The stock trades about -0.06 of its potential returns per unit of risk. The GoldMining is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  155.00  in GoldMining on September 3, 2024 and sell it today you would lose (35.00) from holding GoldMining or give up 22.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	35.94%
Values	Daily Returns

AMG Advanced Metallurgical  vs.  GoldMining

AMG Advanced Metallu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMG Advanced Metallurgical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AMG Advanced is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GoldMining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GoldMining is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AMG Advanced and GoldMining

The main advantage of trading using opposite AMG Advanced and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMG Advanced position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.

The idea behind AMG Advanced Metallurgical and GoldMining pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.