Correlation Between Barrick Gold and Allied Gold

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

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

Diversification Opportunities for Barrick Gold and Allied Gold

0.43

Correlation Coefficient

Barrick Gold  Allied Gold

Very weak diversification

The 3 months correlation between Barrick and Allied is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold Corp and Allied Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Gold and Barrick 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 Barrick Gold Corp are associated (or correlated) with Allied Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Gold has no effect on the direction of Barrick Gold i.e., Barrick Gold and Allied Gold go up and down completely randomly.

Pair Corralation between Barrick Gold and Allied Gold

Assuming the 90 days trading horizon Barrick Gold is expected to generate 16.39 times less return on investment than Allied Gold. But when comparing it to its historical volatility, Barrick Gold Corp is 2.63 times less risky than Allied Gold. It trades about 0.03 of its potential returns per unit of risk. Allied Gold is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  339.00  in Allied Gold on October 25, 2024 and sell it today you would earn a total of  53.00  from holding Allied Gold or generate 15.63% return on investment over 90 days.

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

Barrick Gold Corp  vs.  Allied Gold

Barrick Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrick Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Allied Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Barrick Gold and Allied Gold

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

The idea behind Barrick Gold Corp and Allied Gold 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.