Correlation Between District Copper and Fremont Gold

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

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

Diversification Opportunities for District Copper and Fremont Gold

0.53

Correlation Coefficient

District Copper  Fremont Gold

Very weak diversification

The 3 months correlation between District and Fremont is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding District Copper Corp and Fremont Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fremont Gold and District Copper 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 District Copper Corp are associated (or correlated) with Fremont Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fremont Gold has no effect on the direction of District Copper i.e., District Copper and Fremont Gold go up and down completely randomly.

Pair Corralation between District Copper and Fremont Gold

Assuming the 90 days trading horizon District Copper Corp is expected to generate 1.34 times more return on investment than Fremont Gold. However, District Copper is 1.34 times more volatile than Fremont Gold. It trades about 0.04 of its potential returns per unit of risk. Fremont Gold is currently generating about 0.03 per unit of risk. If you would invest  5.50  in District Copper Corp on October 11, 2024 and sell it today you would lose (1.00) from holding District Copper Corp or give up 18.18% of portfolio value over 90 days.

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

District Copper Corp  vs.  Fremont Gold

District Copper Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in District Copper Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, District Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Fremont Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fremont Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fremont Gold is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with District Copper and Fremont Gold

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

The idea behind District Copper Corp and Fremont 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.