Correlation Between Blue Star and Viva Gold

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

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

Diversification Opportunities for Blue Star and Viva Gold

0.06

Correlation Coefficient

Blue Star  Viva Gold

Significant diversification

The 3 months correlation between Blue and Viva is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Gold and Viva Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viva Gold Corp and Blue Star 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 Blue Star Gold are associated (or correlated) with Viva Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viva Gold Corp has no effect on the direction of Blue Star i.e., Blue Star and Viva Gold go up and down completely randomly.

Pair Corralation between Blue Star and Viva Gold

Assuming the 90 days horizon Blue Star Gold is expected to generate 1.1 times more return on investment than Viva Gold. However, Blue Star is 1.1 times more volatile than Viva Gold Corp. It trades about 0.24 of its potential returns per unit of risk. Viva Gold Corp is currently generating about 0.04 per unit of risk. If you would invest  2.95  in Blue Star Gold on December 20, 2024 and sell it today you would earn a total of  5.45  from holding Blue Star Gold or generate 184.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Blue Star Gold  vs.  Viva Gold Corp

Blue Star Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Gold are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Blue Star reported solid returns over the last few months and may actually be approaching a breakup point.

Viva Gold Corp

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Blue Star and Viva Gold

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

The idea behind Blue Star Gold and Viva 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.