Correlation Between China Gold and Saville Resources

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

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

Diversification Opportunities for China Gold and Saville Resources

0.63

Correlation Coefficient

China Gold  Saville Resources

Poor diversification

The 3 months correlation between China and Saville is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Gold International and Saville Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saville Resources and China 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 China Gold International are associated (or correlated) with Saville Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saville Resources has no effect on the direction of China Gold i.e., China Gold and Saville Resources go up and down completely randomly.

Pair Corralation between China Gold and Saville Resources

Assuming the 90 days trading horizon China Gold International is expected to under-perform the Saville Resources. But the stock apears to be less risky and, when comparing its historical volatility, China Gold International is 2.33 times less risky than Saville Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Saville Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Saville Resources on September 24, 2024 and sell it today you would earn a total of  32.50  from holding Saville Resources or generate 433.33% return on investment over 90 days.

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

China Gold International  vs.  Saville Resources

China Gold International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, China Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Saville Resources

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with China Gold and Saville Resources

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

The idea behind China Gold International and Saville 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.