Correlation Between Chesapeake Gold and Galantas Gold

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

Diversification Opportunities for Chesapeake Gold and Galantas Gold

0.86

Correlation Coefficient

Chesapeake Gold  Galantas Gold

Very poor diversification

The 3 months correlation between Chesapeake and Galantas is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Gold Corp and Galantas Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galantas 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 Galantas Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galantas Gold Corp has no effect on the direction of Chesapeake Gold i.e., Chesapeake Gold and Galantas Gold go up and down completely randomly.

Pair Corralation between Chesapeake Gold and Galantas Gold

Assuming the 90 days horizon Chesapeake Gold Corp is expected to under-perform the Galantas Gold. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Gold Corp is 1.3 times less risky than Galantas Gold. The stock trades about -0.16 of its potential returns per unit of risk. The Galantas Gold Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Galantas Gold Corp on September 10, 2024 and sell it today you would lose (4.00) from holding Galantas Gold Corp or give up 36.36% of portfolio value over 90 days.

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

Chesapeake Gold Corp  vs.  Galantas 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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Galantas Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galantas Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chesapeake Gold and Galantas Gold

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

The idea behind Chesapeake Gold Corp and Galantas 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.