Correlation Between Dundee Precious and Evolution Mining

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

Diversification Opportunities for Dundee Precious and Evolution Mining

0.41

Correlation Coefficient

Dundee Precious  Evolution Mining

Very weak diversification

The 3 months correlation between Dundee and Evolution is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Dundee Precious i.e., Dundee Precious and Evolution Mining go up and down completely randomly.

Pair Corralation between Dundee Precious and Evolution Mining

Assuming the 90 days horizon Dundee Precious is expected to generate 10.7 times less return on investment than Evolution Mining. But when comparing it to its historical volatility, Dundee Precious Metals is 1.95 times less risky than Evolution Mining. It trades about 0.02 of its potential returns per unit of risk. Evolution Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Evolution Mining on September 4, 2024 and sell it today you would earn a total of  62.00  from holding Evolution Mining or generate 23.85% return on investment over 90 days.

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

Dundee Precious Metals  vs.  Evolution Mining

Dundee Precious Metals

Risk-Adjusted Performance

1 of 100

Weak

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

Evolution Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dundee Precious and Evolution Mining

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

The idea behind Dundee Precious Metals and Evolution Mining 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.