Correlation Between Freegold Ventures and O3 Mining

Can any of the company-specific risk be diversified away by investing in both Freegold Ventures and O3 Mining 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 O3 Mining 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 O3 Mining, you can compare the effects of market volatilities on Freegold Ventures and O3 Mining 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 O3 Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freegold Ventures and O3 Mining.

Diversification Opportunities for Freegold Ventures and O3 Mining

0.24

Correlation Coefficient

Freegold Ventures  O3 Mining

Modest diversification

The 3 months correlation between Freegold and OIIIF is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Freegold Ventures Limited and O3 Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on O3 Mining 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 O3 Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of O3 Mining has no effect on the direction of Freegold Ventures i.e., Freegold Ventures and O3 Mining go up and down completely randomly.

Pair Corralation between Freegold Ventures and O3 Mining

Assuming the 90 days horizon Freegold Ventures Limited is expected to generate 6.45 times more return on investment than O3 Mining. However, Freegold Ventures is 6.45 times more volatile than O3 Mining. It trades about 0.1 of its potential returns per unit of risk. O3 Mining is currently generating about -0.02 per unit of risk. If you would invest  49.00  in Freegold Ventures Limited on December 21, 2024 and sell it today you would earn a total of  13.00  from holding Freegold Ventures Limited or generate 26.53% return on investment over 90 days.

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

Freegold Ventures Limited  vs.  O3 Mining

Freegold Ventures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freegold Ventures Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Freegold Ventures reported solid returns over the last few months and may actually be approaching a breakup point.

O3 Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days O3 Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, O3 Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Freegold Ventures and O3 Mining

The main advantage of trading using opposite Freegold Ventures and O3 Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freegold Ventures position performs unexpectedly, O3 Mining 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 O3 Mining will offset losses from the drop in O3 Mining's long position.

The idea behind Freegold Ventures Limited and O3 Mining 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.