Correlation Between Falcon Gold and Pasofino Gold

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

Diversification Opportunities for Falcon Gold and Pasofino Gold

0.67

Correlation Coefficient

Falcon Gold  Pasofino Gold

Poor diversification

The 3 months correlation between Falcon and Pasofino is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Gold Corp and Pasofino Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pasofino Gold Limited 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 Pasofino Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pasofino Gold Limited has no effect on the direction of Falcon Gold i.e., Falcon Gold and Pasofino Gold go up and down completely randomly.

Pair Corralation between Falcon Gold and Pasofino Gold

Given the investment horizon of 90 days Falcon Gold Corp is expected to generate 1.67 times more return on investment than Pasofino Gold. However, Falcon Gold is 1.67 times more volatile than Pasofino Gold Limited. It trades about 0.02 of its potential returns per unit of risk. Pasofino Gold Limited is currently generating about 0.04 per unit of risk. If you would invest  9.00  in Falcon Gold Corp on October 24, 2024 and sell it today you would lose (6.00) from holding Falcon Gold Corp or give up 66.67% of portfolio value over 90 days.

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

Falcon Gold Corp  vs.  Pasofino Gold Limited

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 fairly stable basic indicators, Falcon Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pasofino Gold Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pasofino Gold Limited 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 forward 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.

Pair Trading with Falcon Gold and Pasofino Gold

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

The idea behind Falcon Gold Corp and Pasofino Gold Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.