Correlation Between Centerra Gold and Alamos Gold

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

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

Diversification Opportunities for Centerra Gold and Alamos Gold

0.34

Correlation Coefficient

Centerra Gold  Alamos Gold

Weak diversification

The 3 months correlation between Centerra and Alamos is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and Alamos Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamos Gold and Centerra 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 Centerra Gold are associated (or correlated) with Alamos Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamos Gold has no effect on the direction of Centerra Gold i.e., Centerra Gold and Alamos Gold go up and down completely randomly.

Pair Corralation between Centerra Gold and Alamos Gold

Assuming the 90 days horizon Centerra Gold is expected to generate 2.55 times less return on investment than Alamos Gold. In addition to that, Centerra Gold is 1.19 times more volatile than Alamos Gold. It trades about 0.11 of its total potential returns per unit of risk. Alamos Gold is currently generating about 0.32 per unit of volatility. If you would invest  2,591  in Alamos Gold on December 30, 2024 and sell it today you would earn a total of  1,216  from holding Alamos Gold or generate 46.93% return on investment over 90 days.

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

Centerra Gold  vs.  Alamos Gold

Centerra Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Alamos Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Alamos Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centerra Gold and Alamos Gold

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

The idea behind Centerra Gold and Alamos Gold 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.