Correlation Between GOLD ROAD and SIERRA METALS

Can any of the company-specific risk be diversified away by investing in both GOLD ROAD and SIERRA METALS 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 GOLD ROAD and SIERRA METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GOLD ROAD RES and SIERRA METALS, you can compare the effects of market volatilities on GOLD ROAD and SIERRA METALS 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 GOLD ROAD with a short position of SIERRA METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and SIERRA METALS.

Diversification Opportunities for GOLD ROAD and SIERRA METALS

0.14

Correlation Coefficient

GOLD ROAD  SIERRA METALS

Average diversification

The 3 months correlation between GOLD and SIERRA is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and SIERRA METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA METALS and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with SIERRA METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA METALS has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and SIERRA METALS go up and down completely randomly.

Pair Corralation between GOLD ROAD and SIERRA METALS

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.25 times more return on investment than SIERRA METALS. However, GOLD ROAD is 1.25 times more volatile than SIERRA METALS. It trades about 0.17 of its potential returns per unit of risk. SIERRA METALS is currently generating about -0.03 per unit of risk. If you would invest  121.00  in GOLD ROAD RES on December 25, 2024 and sell it today you would earn a total of  38.00  from holding GOLD ROAD RES or generate 31.4% return on investment over 90 days.

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

GOLD ROAD RES  vs.  SIERRA METALS

GOLD ROAD RES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

SIERRA METALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GOLD ROAD and SIERRA METALS

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

The idea behind GOLD ROAD RES and SIERRA METALS 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.