Correlation Between Centerra Gold and Torex Gold

Can any of the company-specific risk be diversified away by investing in both Centerra Gold and Torex 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 Torex 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 Torex Gold Resources, you can compare the effects of market volatilities on Centerra Gold and Torex 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 Torex Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centerra Gold and Torex Gold.

Diversification Opportunities for Centerra Gold and Torex Gold

0.11

Correlation Coefficient

Centerra Gold  Torex Gold

Average diversification

The 3 months correlation between Centerra and Torex is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and Torex Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torex Gold Resources 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 Torex Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torex Gold Resources has no effect on the direction of Centerra Gold i.e., Centerra Gold and Torex Gold go up and down completely randomly.

Pair Corralation between Centerra Gold and Torex Gold

Assuming the 90 days horizon Centerra Gold is expected to under-perform the Torex Gold. But the stock apears to be less risky and, when comparing its historical volatility, Centerra Gold is 1.19 times less risky than Torex Gold. The stock trades about -0.03 of its potential returns per unit of risk. The Torex Gold Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,508  in Torex Gold Resources on August 31, 2024 and sell it today you would earn a total of  462.00  from holding Torex Gold Resources or generate 18.42% return on investment over 90 days.

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

Centerra Gold  vs.  Torex Gold Resources

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 very healthy basic indicators, Centerra Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Torex Gold Resources

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Centerra Gold and Torex Gold

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

The idea behind Centerra Gold and Torex Gold Resources 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.