Correlation Between Chesapeake Gold and Canagold Resources

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

Diversification Opportunities for Chesapeake Gold and Canagold Resources

0.15

Correlation Coefficient

Chesapeake Gold  Canagold Resources

Average diversification

The 3 months correlation between Chesapeake and Canagold is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Gold Corp and Canagold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canagold Resources 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 Canagold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canagold Resources has no effect on the direction of Chesapeake Gold i.e., Chesapeake Gold and Canagold Resources go up and down completely randomly.

Pair Corralation between Chesapeake Gold and Canagold Resources

Assuming the 90 days horizon Chesapeake Gold Corp is expected to under-perform the Canagold Resources. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Gold Corp is 1.36 times less risky than Canagold Resources. The stock trades about -0.25 of its potential returns per unit of risk. The Canagold Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Canagold Resources on December 2, 2024 and sell it today you would earn a total of  3.00  from holding Canagold Resources or generate 9.09% return on investment over 90 days.

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

Chesapeake Gold Corp  vs.  Canagold Resources

Chesapeake Gold Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chesapeake Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Canagold Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canagold Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Canagold Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Gold and Canagold Resources

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

The idea behind Chesapeake Gold Corp and Canagold 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.