Correlation Between North Peak and Lavras Gold

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

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

Diversification Opportunities for North Peak and Lavras Gold

0.5

Correlation Coefficient

North Peak  Lavras Gold

Very weak diversification

The 3 months correlation between North and Lavras is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding North Peak Resources and Lavras Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavras Gold Corp and North Peak 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 North Peak Resources are associated (or correlated) with Lavras Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavras Gold Corp has no effect on the direction of North Peak i.e., North Peak and Lavras Gold go up and down completely randomly.

Pair Corralation between North Peak and Lavras Gold

Assuming the 90 days horizon North Peak Resources is expected to generate 1.12 times more return on investment than Lavras Gold. However, North Peak is 1.12 times more volatile than Lavras Gold Corp. It trades about 0.0 of its potential returns per unit of risk. Lavras Gold Corp is currently generating about -0.04 per unit of risk. If you would invest  42.00  in North Peak Resources on December 29, 2024 and sell it today you would lose (2.00) from holding North Peak Resources or give up 4.76% of portfolio value over 90 days.

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

North Peak Resources  vs.  Lavras Gold Corp

North Peak Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, North Peak is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lavras Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lavras Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with North Peak and Lavras Gold

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

The idea behind North Peak Resources and Lavras 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.