Correlation Between Carlin Gold and Desert Gold

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

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

Diversification Opportunities for Carlin Gold and Desert Gold

-0.21

Correlation Coefficient

Carlin Gold  Desert Gold

Very good diversification

The 3 months correlation between Carlin and Desert is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Carlin Gold and Desert Gold Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desert Gold Ventures and Carlin 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 Carlin Gold are associated (or correlated) with Desert Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desert Gold Ventures has no effect on the direction of Carlin Gold i.e., Carlin Gold and Desert Gold go up and down completely randomly.

Pair Corralation between Carlin Gold and Desert Gold

Assuming the 90 days horizon Carlin Gold is expected to generate 0.7 times more return on investment than Desert Gold. However, Carlin Gold is 1.43 times less risky than Desert Gold. It trades about 0.11 of its potential returns per unit of risk. Desert Gold Ventures is currently generating about 0.06 per unit of risk. If you would invest  15.00  in Carlin Gold on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Carlin Gold or generate 40.0% return on investment over 90 days.

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

Carlin Gold  vs.  Desert Gold Ventures

Carlin Gold

Risk-Adjusted Performance

OK

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

Desert Gold Ventures

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Desert Gold Ventures are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Desert Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlin Gold and Desert Gold

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

The idea behind Carlin Gold and Desert Gold Ventures 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.