Correlation Between Big Ridge and Roscan Gold

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

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

Diversification Opportunities for Big Ridge and Roscan Gold

-0.19

Correlation Coefficient

Big Ridge  Roscan Gold

Good diversification

The 3 months correlation between Big and Roscan is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold and Roscan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roscan Gold Corp and Big Ridge 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 Big Ridge Gold are associated (or correlated) with Roscan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roscan Gold Corp has no effect on the direction of Big Ridge i.e., Big Ridge and Roscan Gold go up and down completely randomly.

Pair Corralation between Big Ridge and Roscan Gold

Assuming the 90 days horizon Big Ridge Gold is expected to under-perform the Roscan Gold. In addition to that, Big Ridge is 1.0 times more volatile than Roscan Gold Corp. It trades about -0.01 of its total potential returns per unit of risk. Roscan Gold Corp is currently generating about 0.05 per unit of volatility. If you would invest  4.90  in Roscan Gold Corp on December 28, 2024 and sell it today you would earn a total of  0.30  from holding Roscan Gold Corp or generate 6.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Big Ridge Gold  vs.  Roscan Gold Corp

Big Ridge Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Ridge Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Big Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Roscan Gold Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roscan Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Roscan Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Ridge and Roscan Gold

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

The idea behind Big Ridge Gold and Roscan Gold Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.