Correlation Between Chibougamau Independent and Outcrop Gold

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

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

Diversification Opportunities for Chibougamau Independent and Outcrop Gold

-0.1

Correlation Coefficient

Chibougamau Independent  Outcrop Gold

Good diversification

The 3 months correlation between Chibougamau and Outcrop is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chibougamau Independent Mines and Outcrop Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outcrop Gold Corp and Chibougamau Independent 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 Chibougamau Independent Mines are associated (or correlated) with Outcrop Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outcrop Gold Corp has no effect on the direction of Chibougamau Independent i.e., Chibougamau Independent and Outcrop Gold go up and down completely randomly.

Pair Corralation between Chibougamau Independent and Outcrop Gold

Assuming the 90 days horizon Chibougamau Independent Mines is expected to under-perform the Outcrop Gold. But the stock apears to be less risky and, when comparing its historical volatility, Chibougamau Independent Mines is 1.7 times less risky than Outcrop Gold. The stock trades about -0.11 of its potential returns per unit of risk. The Outcrop Gold Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Outcrop Gold Corp on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Outcrop Gold Corp or generate 4.35% return on investment over 90 days.

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

Chibougamau Independent Mines  vs.  Outcrop Gold Corp

Chibougamau Independent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chibougamau Independent Mines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chibougamau Independent showed solid returns over the last few months and may actually be approaching a breakup point.

Outcrop Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Outcrop Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Outcrop Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chibougamau Independent and Outcrop Gold

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

The idea behind Chibougamau Independent Mines and Outcrop 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.