Correlation Between Cerrado Gold and Newcore Gold

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

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

Diversification Opportunities for Cerrado Gold and Newcore Gold

0.3

Correlation Coefficient

Cerrado Gold  Newcore Gold

Weak diversification

The 3 months correlation between Cerrado and Newcore is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cerrado Gold and Newcore Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcore Gold and Cerrado 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 Cerrado Gold are associated (or correlated) with Newcore Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcore Gold has no effect on the direction of Cerrado Gold i.e., Cerrado Gold and Newcore Gold go up and down completely randomly.

Pair Corralation between Cerrado Gold and Newcore Gold

Assuming the 90 days horizon Cerrado Gold is expected to generate 1.64 times more return on investment than Newcore Gold. However, Cerrado Gold is 1.64 times more volatile than Newcore Gold. It trades about 0.11 of its potential returns per unit of risk. Newcore Gold is currently generating about 0.02 per unit of risk. If you would invest  17.00  in Cerrado Gold on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Cerrado Gold or generate 41.18% return on investment over 90 days.

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

Cerrado Gold  vs.  Newcore Gold

Cerrado Gold

Risk-Adjusted Performance

8 of 100

OK

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

Newcore Gold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newcore Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Newcore Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cerrado Gold and Newcore Gold

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

The idea behind Cerrado Gold and Newcore Gold 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.