Correlation Between Equinox Gold and Royal Gold

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

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

Diversification Opportunities for Equinox Gold and Royal Gold

0.64

Correlation Coefficient

Equinox Gold  Royal Gold

Poor diversification

The 3 months correlation between Equinox and Royal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Equinox Gold Corp and Royal Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Gold and Equinox Gold 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 Equinox Gold Corp are associated (or correlated) with Royal Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Gold has no effect on the direction of Equinox Gold i.e., Equinox Gold and Royal Gold go up and down completely randomly.

Pair Corralation between Equinox Gold and Royal Gold

Considering the 90-day investment horizon Equinox Gold Corp is expected to generate 2.07 times more return on investment than Royal Gold. However, Equinox Gold is 2.07 times more volatile than Royal Gold. It trades about 0.08 of its potential returns per unit of risk. Royal Gold is currently generating about 0.04 per unit of risk. If you would invest  565.00  in Equinox Gold Corp on November 28, 2024 and sell it today you would earn a total of  83.00  from holding Equinox Gold Corp or generate 14.69% return on investment over 90 days.

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

Equinox Gold Corp  vs.  Royal Gold

Equinox Gold Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equinox Gold Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Equinox Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Royal Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Royal Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Equinox Gold and Royal Gold

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

The idea behind Equinox Gold Corp and Royal 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.