Correlation Between Bravada Gold and Golden Lake

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

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

Diversification Opportunities for Bravada Gold and Golden Lake

0.76

Correlation Coefficient

Bravada Gold  Golden Lake

Poor diversification

The 3 months correlation between Bravada and Golden is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bravada Gold and Golden Lake Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Lake Exploration and Bravada 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 Bravada Gold are associated (or correlated) with Golden Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Lake Exploration has no effect on the direction of Bravada Gold i.e., Bravada Gold and Golden Lake go up and down completely randomly.

Pair Corralation between Bravada Gold and Golden Lake

Assuming the 90 days horizon Bravada Gold is expected to generate 1.37 times more return on investment than Golden Lake. However, Bravada Gold is 1.37 times more volatile than Golden Lake Exploration. It trades about 0.13 of its potential returns per unit of risk. Golden Lake Exploration is currently generating about 0.14 per unit of risk. If you would invest  1.17  in Bravada Gold on December 21, 2024 and sell it today you would earn a total of  0.93  from holding Bravada Gold or generate 79.49% return on investment over 90 days.

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

Bravada Gold  vs.  Golden Lake Exploration

Bravada Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bravada Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bravada Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Golden Lake Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Lake Exploration are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Golden Lake reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bravada Gold and Golden Lake

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

The idea behind Bravada Gold and Golden Lake Exploration 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.