Correlation Between Dundee Precious and Kinross Gold

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

Diversification Opportunities for Dundee Precious and Kinross Gold

0.79

Correlation Coefficient

Dundee Precious  Kinross Gold

Poor diversification

The 3 months correlation between Dundee and Kinross is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Kinross Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinross 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 Kinross Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinross Gold has no effect on the direction of Dundee Precious i.e., Dundee Precious and Kinross Gold go up and down completely randomly.

Pair Corralation between Dundee Precious and Kinross Gold

Assuming the 90 days horizon Dundee Precious Metals is expected to generate 0.75 times more return on investment than Kinross Gold. However, Dundee Precious Metals is 1.34 times less risky than Kinross Gold. It trades about 0.31 of its potential returns per unit of risk. Kinross Gold is currently generating about 0.09 per unit of risk. If you would invest  937.00  in Dundee Precious Metals on December 2, 2024 and sell it today you would earn a total of  238.00  from holding Dundee Precious Metals or generate 25.4% return on investment over 90 days.

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

Dundee Precious Metals  vs.  Kinross Gold

Dundee Precious Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Precious Metals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Dundee Precious reported solid returns over the last few months and may actually be approaching a breakup point.

Kinross Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinross Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kinross Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dundee Precious and Kinross Gold

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

The idea behind Dundee Precious Metals and Kinross 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.