Correlation Between Central Asia and GoldMining

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

By analyzing existing cross correlation between Central Asia Metals and GoldMining, you can compare the effects of market volatilities on Central Asia and GoldMining 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 Central Asia with a short position of GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and GoldMining.

Diversification Opportunities for Central Asia and GoldMining

0.67

Correlation Coefficient

Central Asia  GoldMining

Poor diversification

The 3 months correlation between Central and GoldMining is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and Central Asia 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 Central Asia Metals are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Central Asia i.e., Central Asia and GoldMining go up and down completely randomly.

Pair Corralation between Central Asia and GoldMining

Assuming the 90 days trading horizon Central Asia Metals is expected to generate 0.83 times more return on investment than GoldMining. However, Central Asia Metals is 1.21 times less risky than GoldMining. It trades about -0.05 of its potential returns per unit of risk. GoldMining is currently generating about -0.09 per unit of risk. If you would invest  16,440  in Central Asia Metals on December 2, 2024 and sell it today you would lose (1,080) from holding Central Asia Metals or give up 6.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.08%
Values	Daily Returns

Central Asia Metals  vs.  GoldMining

Central Asia Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GoldMining

Risk-Adjusted Performance

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Central Asia and GoldMining

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

The idea behind Central Asia Metals and GoldMining 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 CEOs Directory module to screen CEOs from public companies around the world.