Correlation Between Dundee Precious and Centerra Gold

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

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

Diversification Opportunities for Dundee Precious and Centerra Gold

0.85

Correlation Coefficient

Dundee Precious  Centerra Gold

Very poor diversification

The 3 months correlation between Dundee and Centerra is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold and Dundee Precious 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 Dundee Precious Metals are associated (or correlated) with Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Dundee Precious i.e., Dundee Precious and Centerra Gold go up and down completely randomly.

Pair Corralation between Dundee Precious and Centerra Gold

Assuming the 90 days trading horizon Dundee Precious Metals is expected to generate 0.69 times more return on investment than Centerra Gold. However, Dundee Precious Metals is 1.45 times less risky than Centerra Gold. It trades about 0.04 of its potential returns per unit of risk. Centerra Gold is currently generating about -0.03 per unit of risk. If you would invest  1,271  in Dundee Precious Metals on August 31, 2024 and sell it today you would earn a total of  41.00  from holding Dundee Precious Metals or generate 3.23% return on investment over 90 days.

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

Dundee Precious Metals  vs.  Centerra Gold

Dundee Precious Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Dundee Precious is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Centerra Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dundee Precious and Centerra Gold

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

The idea behind Dundee Precious Metals and Centerra 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.