Correlation Between Batero Gold and Colonial Coal

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

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

Diversification Opportunities for Batero Gold and Colonial Coal

0.27

Correlation Coefficient

Batero Gold  Colonial Coal

Modest diversification

The 3 months correlation between Batero and Colonial is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Batero Gold Corp and Colonial Coal International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colonial Coal Intern and Batero 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 Batero Gold Corp are associated (or correlated) with Colonial Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colonial Coal Intern has no effect on the direction of Batero Gold i.e., Batero Gold and Colonial Coal go up and down completely randomly.

Pair Corralation between Batero Gold and Colonial Coal

Assuming the 90 days horizon Batero Gold Corp is expected to generate 2.88 times more return on investment than Colonial Coal. However, Batero Gold is 2.88 times more volatile than Colonial Coal International. It trades about -0.01 of its potential returns per unit of risk. Colonial Coal International is currently generating about -0.12 per unit of risk. If you would invest  5.00  in Batero Gold Corp on September 22, 2024 and sell it today you would lose (1.00) from holding Batero Gold Corp or give up 20.0% of portfolio value over 90 days.

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

Batero Gold Corp  vs.  Colonial Coal International

Batero Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Batero Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Batero Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Colonial Coal Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colonial Coal International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Batero Gold and Colonial Coal

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

The idea behind Batero Gold Corp and Colonial Coal International 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.