Correlation Between Baru Gold and Roscan Gold

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

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

Diversification Opportunities for Baru Gold and Roscan Gold

-0.54

Correlation Coefficient

Baru Gold  Roscan Gold

Excellent diversification

The 3 months correlation between Baru and Roscan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Baru Gold Corp 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 Baru 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 Baru Gold Corp 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 Baru Gold i.e., Baru Gold and Roscan Gold go up and down completely randomly.

Pair Corralation between Baru Gold and Roscan Gold

Assuming the 90 days horizon Baru Gold Corp is expected to under-perform the Roscan Gold. In addition to that, Baru Gold is 1.22 times more volatile than Roscan Gold Corp. It trades about -0.05 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 29, 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	Very Weak
Accuracy	96.83%
Values	Daily Returns

Baru Gold Corp  vs.  Roscan Gold Corp

Baru Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baru Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 Baru Gold and Roscan Gold

The main advantage of trading using opposite Baru Gold and Roscan Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baru Gold 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 Baru Gold Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.