Correlation Between Centerra Gold and Black Iron

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

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

Diversification Opportunities for Centerra Gold and Black Iron

-0.8

Correlation Coefficient

Centerra Gold  Black Iron

Pay attention - limited upside

The 3 months correlation between Centerra and Black is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and Black Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Iron 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 Black Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Iron has no effect on the direction of Centerra Gold i.e., Centerra Gold and Black Iron go up and down completely randomly.

Pair Corralation between Centerra Gold and Black Iron

Assuming the 90 days horizon Centerra Gold is expected to under-perform the Black Iron. But the stock apears to be less risky and, when comparing its historical volatility, Centerra Gold is 6.94 times less risky than Black Iron. The stock trades about -0.04 of its potential returns per unit of risk. The Black Iron is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Black Iron on October 9, 2024 and sell it today you would earn a total of  7.00  from holding Black Iron or generate 140.0% return on investment over 90 days.

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

Centerra Gold  vs.  Black Iron

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Black Iron

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Black Iron are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Black Iron displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centerra Gold and Black Iron

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

The idea behind Centerra Gold and Black Iron 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.