Correlation Between Chesapeake Gold and Provenance Gold

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

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

Diversification Opportunities for Chesapeake Gold and Provenance Gold

-0.76

Correlation Coefficient

Chesapeake Gold  Provenance Gold

Pay attention - limited upside

The 3 months correlation between Chesapeake and Provenance is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Gold Corp and Provenance Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provenance Gold Corp and Chesapeake 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 Chesapeake Gold Corp are associated (or correlated) with Provenance Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provenance Gold Corp has no effect on the direction of Chesapeake Gold i.e., Chesapeake Gold and Provenance Gold go up and down completely randomly.

Pair Corralation between Chesapeake Gold and Provenance Gold

Assuming the 90 days horizon Chesapeake Gold Corp is expected to under-perform the Provenance Gold. But the otc stock apears to be less risky and, when comparing its historical volatility, Chesapeake Gold Corp is 1.34 times less risky than Provenance Gold. The otc stock trades about -0.08 of its potential returns per unit of risk. The Provenance Gold Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Provenance Gold Corp on October 25, 2024 and sell it today you would earn a total of  8.00  from holding Provenance Gold Corp or generate 66.67% return on investment over 90 days.

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

Chesapeake Gold Corp  vs.  Provenance Gold Corp

Chesapeake Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Provenance Gold Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Provenance Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Provenance Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Gold and Provenance Gold

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

The idea behind Chesapeake Gold Corp and Provenance Gold Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.