Correlation Between Blue Lagoon and Asante Gold

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

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

Diversification Opportunities for Blue Lagoon and Asante Gold

-0.16

Correlation Coefficient

Blue Lagoon  Asante Gold

Good diversification

The 3 months correlation between Blue and Asante is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Blue Lagoon Resources and Asante Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asante Gold and Blue Lagoon 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 Lagoon Resources are associated (or correlated) with Asante Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asante Gold has no effect on the direction of Blue Lagoon i.e., Blue Lagoon and Asante Gold go up and down completely randomly.

Pair Corralation between Blue Lagoon and Asante Gold

Assuming the 90 days horizon Blue Lagoon Resources is expected to generate 1.86 times more return on investment than Asante Gold. However, Blue Lagoon is 1.86 times more volatile than Asante Gold. It trades about 0.01 of its potential returns per unit of risk. Asante Gold is currently generating about -0.02 per unit of risk. If you would invest  25.00  in Blue Lagoon Resources on October 22, 2024 and sell it today you would lose (15.70) from holding Blue Lagoon Resources or give up 62.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Blue Lagoon Resources  vs.  Asante Gold

Blue Lagoon Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Lagoon Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Blue Lagoon reported solid returns over the last few months and may actually be approaching a breakup point.

Asante Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asante Gold 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Blue Lagoon and Asante Gold

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

The idea behind Blue Lagoon Resources and Asante Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.