Correlation Between Colonial Coal and Banyan Gold

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Can any of the company-specific risk be diversified away by investing in both Colonial Coal and Banyan 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 Colonial Coal and Banyan Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colonial Coal International and Banyan Gold Corp, you can compare the effects of market volatilities on Colonial Coal and Banyan 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 Colonial Coal with a short position of Banyan Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colonial Coal and Banyan Gold.

Diversification Opportunities for Colonial Coal and Banyan Gold

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Colonial and Banyan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Colonial Coal International and Banyan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banyan Gold Corp and Colonial Coal 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 Colonial Coal International are associated (or correlated) with Banyan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banyan Gold Corp has no effect on the direction of Colonial Coal i.e., Colonial Coal and Banyan Gold go up and down completely randomly.

Pair Corralation between Colonial Coal and Banyan Gold

Assuming the 90 days horizon Colonial Coal International is expected to under-perform the Banyan Gold. But the stock apears to be less risky and, when comparing its historical volatility, Colonial Coal International is 1.11 times less risky than Banyan Gold. The stock trades about -0.2 of its potential returns per unit of risk. The Banyan Gold Corp is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Banyan Gold Corp on September 23, 2024 and sell it today you would lose (2.00) from holding Banyan Gold Corp or give up 9.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Colonial Coal International  vs.  Banyan Gold Corp

 Performance 
       Timeline  
Colonial Coal Intern 

Risk-Adjusted Performance

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Weak
 
Strong
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.
Banyan Gold Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Banyan Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Colonial Coal and Banyan Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Colonial Coal and Banyan Gold

The main advantage of trading using opposite Colonial Coal and Banyan Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colonial Coal position performs unexpectedly, Banyan 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 Banyan Gold will offset losses from the drop in Banyan Gold's long position.
The idea behind Colonial Coal International and Banyan 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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