Correlation Between Alamos Gold and Gold Resource

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

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

Diversification Opportunities for Alamos Gold and Gold Resource

0.83

Correlation Coefficient

Alamos Gold  Gold Resource

Very poor diversification

The 3 months correlation between Alamos and Gold is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alamos Gold and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource and Alamos 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 Alamos Gold are associated (or correlated) with Gold Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of Alamos Gold i.e., Alamos Gold and Gold Resource go up and down completely randomly.

Pair Corralation between Alamos Gold and Gold Resource

Considering the 90-day investment horizon Alamos Gold is expected to generate 2.85 times less return on investment than Gold Resource. But when comparing it to its historical volatility, Alamos Gold is 4.52 times less risky than Gold Resource. It trades about 0.34 of its potential returns per unit of risk. Gold Resource is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Gold Resource on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Gold Resource or generate 152.17% return on investment over 90 days.

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

Alamos Gold  vs.  Gold Resource

Alamos Gold

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Alamos Gold demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Gold Resource

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Resource are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gold Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alamos Gold and Gold Resource

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

The idea behind Alamos Gold and Gold Resource 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..