Correlation Between Bravada Gold and Colonial Coal

Can any of the company-specific risk be diversified away by investing in both Bravada 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 Bravada 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 Bravada Gold and Colonial Coal International, you can compare the effects of market volatilities on Bravada 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 Bravada Gold with a short position of Colonial Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bravada Gold and Colonial Coal.

Diversification Opportunities for Bravada Gold and Colonial Coal

0.59

Correlation Coefficient

Bravada Gold  Colonial Coal

Very weak diversification

The 3 months correlation between Bravada and Colonial is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bravada Gold 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 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 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 Bravada Gold i.e., Bravada Gold and Colonial Coal go up and down completely randomly.

Pair Corralation between Bravada Gold and Colonial Coal

Assuming the 90 days horizon Bravada Gold is expected to generate 4.2 times more return on investment than Colonial Coal. However, Bravada Gold is 4.2 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  3.00  in Bravada Gold on September 22, 2024 and sell it today you would lose (1.00) from holding Bravada Gold or give up 33.33% of portfolio value over 90 days.

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

Bravada Gold  vs.  Colonial Coal International

Bravada Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bravada Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Bravada 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 Bravada Gold and Colonial Coal

The main advantage of trading using opposite Bravada Gold and Colonial Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bravada 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 Bravada Gold 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.