Correlation Between Discovery Harbour and Falcon Gold

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

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

Diversification Opportunities for Discovery Harbour and Falcon Gold

0.7

Correlation Coefficient

Discovery Harbour  Falcon Gold

Poor diversification

The 3 months correlation between Discovery and Falcon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Harbour Resources and Falcon Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Gold Corp and Discovery Harbour 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 Discovery Harbour Resources are associated (or correlated) with Falcon Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Gold Corp has no effect on the direction of Discovery Harbour i.e., Discovery Harbour and Falcon Gold go up and down completely randomly.

Pair Corralation between Discovery Harbour and Falcon Gold

Assuming the 90 days horizon Discovery Harbour Resources is expected to generate 2.5 times more return on investment than Falcon Gold. However, Discovery Harbour is 2.5 times more volatile than Falcon Gold Corp. It trades about 0.05 of its potential returns per unit of risk. Falcon Gold Corp is currently generating about 0.02 per unit of risk. If you would invest  10.00  in Discovery Harbour Resources on October 11, 2024 and sell it today you would lose (3.00) from holding Discovery Harbour Resources or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Discovery Harbour Resources  vs.  Falcon Gold Corp

Discovery Harbour

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Discovery Harbour Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Falcon Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Discovery Harbour and Falcon Gold

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

The idea behind Discovery Harbour Resources and Falcon 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.