Correlation Between Equity Metals and Nexus Gold

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

Diversification Opportunities for Equity Metals and Nexus Gold

0.04

Correlation Coefficient

Equity Metals  Nexus Gold

Significant diversification

The 3 months correlation between Equity and Nexus is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Equity Metals Corp and Nexus Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexus 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 Nexus Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexus Gold Corp has no effect on the direction of Equity Metals i.e., Equity Metals and Nexus Gold go up and down completely randomly.

Pair Corralation between Equity Metals and Nexus Gold

Assuming the 90 days trading horizon Equity Metals is expected to generate 7.32 times less return on investment than Nexus Gold. But when comparing it to its historical volatility, Equity Metals Corp is 5.19 times less risky than Nexus Gold. It trades about 0.09 of its potential returns per unit of risk. Nexus Gold Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Nexus Gold Corp on December 21, 2024 and sell it today you would earn a total of  0.50  from holding Nexus Gold Corp or generate 50.0% return on investment over 90 days.

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

Equity Metals Corp  vs.  Nexus Gold Corp

Equity Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Metals Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Equity Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Nexus Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexus Gold Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nexus Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equity Metals and Nexus Gold

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

The idea behind Equity Metals Corp and Nexus 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.