Correlation Between Falcon Gold and Nexus Gold

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

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

Diversification Opportunities for Falcon Gold and Nexus Gold

0.38

Correlation Coefficient

Falcon Gold  Nexus Gold

Weak diversification

The 3 months correlation between Falcon and Nexus is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Gold 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 Falcon 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 Falcon Gold 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 Falcon Gold i.e., Falcon Gold and Nexus Gold go up and down completely randomly.

Pair Corralation between Falcon Gold and Nexus Gold

Given the investment horizon of 90 days Falcon Gold Corp is expected to under-perform the Nexus Gold. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Gold Corp is 5.87 times less risky than Nexus Gold. The stock trades about -0.07 of its potential returns per unit of risk. The Nexus Gold Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Nexus Gold Corp on October 9, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Falcon Gold Corp  vs.  Nexus Gold Corp

Falcon Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nexus Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexus Gold Corp are ranked lower than 7 (%) 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 Falcon Gold and Nexus Gold

The main advantage of trading using opposite Falcon Gold and Nexus Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Gold 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 Falcon Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.