Correlation Between AbraSilver Resource and GoGold Resources

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

By analyzing existing cross correlation between AbraSilver Resource Corp and GoGold Resources, you can compare the effects of market volatilities on AbraSilver Resource and GoGold Resources 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 AbraSilver Resource with a short position of GoGold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of AbraSilver Resource and GoGold Resources.

Diversification Opportunities for AbraSilver Resource and GoGold Resources

0.88

Correlation Coefficient

AbraSilver Resource  GoGold Resources

Very poor diversification

The 3 months correlation between AbraSilver and GoGold is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AbraSilver Resource Corp and GoGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoGold Resources and AbraSilver Resource 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 AbraSilver Resource Corp are associated (or correlated) with GoGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoGold Resources has no effect on the direction of AbraSilver Resource i.e., AbraSilver Resource and GoGold Resources go up and down completely randomly.

Pair Corralation between AbraSilver Resource and GoGold Resources

Assuming the 90 days trading horizon AbraSilver Resource Corp is expected to generate 0.91 times more return on investment than GoGold Resources. However, AbraSilver Resource Corp is 1.1 times less risky than GoGold Resources. It trades about 0.11 of its potential returns per unit of risk. GoGold Resources is currently generating about 0.07 per unit of risk. If you would invest  221.00  in AbraSilver Resource Corp on August 31, 2024 and sell it today you would earn a total of  51.00  from holding AbraSilver Resource Corp or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AbraSilver Resource Corp  vs.  GoGold Resources

AbraSilver Resource Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AbraSilver Resource Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AbraSilver Resource showed solid returns over the last few months and may actually be approaching a breakup point.

GoGold Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GoGold Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, GoGold Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AbraSilver Resource and GoGold Resources

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

The idea behind AbraSilver Resource Corp and GoGold Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.