Correlation Between Freegold Ventures and Golden Lake

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

By analyzing existing cross correlation between Freegold Ventures Limited and Golden Lake Exploration, you can compare the effects of market volatilities on Freegold Ventures and Golden Lake 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 Freegold Ventures with a short position of Golden Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freegold Ventures and Golden Lake.

Diversification Opportunities for Freegold Ventures and Golden Lake

0.87

Correlation Coefficient

Freegold Ventures  Golden Lake

Very poor diversification

The 3 months correlation between Freegold and Golden is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Freegold Ventures Limited and Golden Lake Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Lake Exploration and Freegold Ventures 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 Freegold Ventures Limited are associated (or correlated) with Golden Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Lake Exploration has no effect on the direction of Freegold Ventures i.e., Freegold Ventures and Golden Lake go up and down completely randomly.

Pair Corralation between Freegold Ventures and Golden Lake

Assuming the 90 days horizon Freegold Ventures is expected to generate 1.05 times less return on investment than Golden Lake. But when comparing it to its historical volatility, Freegold Ventures Limited is 2.3 times less risky than Golden Lake. It trades about 0.05 of its potential returns per unit of risk. Golden Lake Exploration is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Golden Lake Exploration on October 10, 2024 and sell it today you would lose (6.80) from holding Golden Lake Exploration or give up 68.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Freegold Ventures Limited  vs.  Golden Lake Exploration

Freegold Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freegold Ventures Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Golden Lake Exploration

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Golden Lake Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Freegold Ventures and Golden Lake

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

The idea behind Freegold Ventures Limited and Golden Lake Exploration 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.