Correlation Between Equity Metals and Baru Gold

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

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

Diversification Opportunities for Equity Metals and Baru Gold

-0.51

Correlation Coefficient

Equity Metals  Baru Gold

Excellent diversification

The 3 months correlation between Equity and Baru is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Equity Metals Corp and Baru Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baru Gold Corp and Equity Metals 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 Equity Metals Corp are associated (or correlated) with Baru Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baru Gold Corp has no effect on the direction of Equity Metals i.e., Equity Metals and Baru Gold go up and down completely randomly.

Pair Corralation between Equity Metals and Baru Gold

Assuming the 90 days trading horizon Equity Metals is expected to generate 67.85 times less return on investment than Baru Gold. But when comparing it to its historical volatility, Equity Metals Corp is 2.79 times less risky than Baru Gold. It trades about 0.01 of its potential returns per unit of risk. Baru Gold Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Baru Gold Corp on October 8, 2024 and sell it today you would earn a total of  4.50  from holding Baru Gold Corp or generate 225.0% return on investment over 90 days.

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

Equity Metals Corp  vs.  Baru Gold Corp

Equity Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baru Gold Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baru Gold Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Baru Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equity Metals and Baru Gold

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

The idea behind Equity Metals Corp and Baru Gold Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.