Correlation Between Diamond Estates and Alamos Gold

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

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

Diversification Opportunities for Diamond Estates and Alamos Gold

-0.67

Correlation Coefficient

Diamond Estates  Alamos Gold

Excellent diversification

The 3 months correlation between Diamond and Alamos is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Alamos Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamos Gold and Diamond Estates 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 Diamond Estates Wines are associated (or correlated) with Alamos Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamos Gold has no effect on the direction of Diamond Estates i.e., Diamond Estates and Alamos Gold go up and down completely randomly.

Pair Corralation between Diamond Estates and Alamos Gold

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Alamos Gold. In addition to that, Diamond Estates is 1.82 times more volatile than Alamos Gold. It trades about -0.03 of its total potential returns per unit of risk. Alamos Gold is currently generating about 0.29 per unit of volatility. If you would invest  2,644  in Alamos Gold on December 27, 2024 and sell it today you would earn a total of  1,044  from holding Alamos Gold or generate 39.49% return on investment over 90 days.

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

Diamond Estates Wines  vs.  Alamos Gold

Diamond Estates Wines

Risk-Adjusted Performance

Very Weak

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

Alamos Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Alamos Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Estates and Alamos Gold

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

The idea behind Diamond Estates Wines and Alamos 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.