Correlation Between Alamos Gold and Sibanye Gold

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

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

Diversification Opportunities for Alamos Gold and Sibanye Gold

0.6

Correlation Coefficient

Alamos Gold  Sibanye Gold

Poor diversification

The 3 months correlation between Alamos and Sibanye is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alamos Gold and Sibanye Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sibanye Gold 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 Sibanye Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sibanye Gold has no effect on the direction of Alamos Gold i.e., Alamos Gold and Sibanye Gold go up and down completely randomly.

Pair Corralation between Alamos Gold and Sibanye Gold

Considering the 90-day investment horizon Alamos Gold is expected to generate 6.06 times less return on investment than Sibanye Gold. But when comparing it to its historical volatility, Alamos Gold is 2.23 times less risky than Sibanye Gold. It trades about 0.03 of its potential returns per unit of risk. Sibanye Gold Ltd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Sibanye Gold Ltd on September 2, 2024 and sell it today you would earn a total of  54.00  from holding Sibanye Gold Ltd or generate 15.21% return on investment over 90 days.

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

Alamos Gold  vs.  Sibanye Gold Ltd

Alamos Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Alamos Gold is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Sibanye Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sibanye Gold Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Sibanye Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alamos Gold and Sibanye Gold

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

The idea behind Alamos Gold and Sibanye Gold Ltd 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.