Correlation Between Freegold Ventures and Sumitomo Metal

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

Diversification Opportunities for Freegold Ventures and Sumitomo Metal

0.52

Correlation Coefficient

Freegold Ventures  Sumitomo Metal

Very weak diversification

The 3 months correlation between Freegold and Sumitomo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Freegold Ventures Limited and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal 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 Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Freegold Ventures i.e., Freegold Ventures and Sumitomo Metal go up and down completely randomly.

Pair Corralation between Freegold Ventures and Sumitomo Metal

Assuming the 90 days horizon Freegold Ventures Limited is expected to generate 6.07 times more return on investment than Sumitomo Metal. However, Freegold Ventures is 6.07 times more volatile than Sumitomo Metal Mining. It trades about 0.1 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about 0.18 per unit of risk. If you would invest  49.00  in Freegold Ventures Limited on December 22, 2024 and sell it today you would earn a total of  12.00  from holding Freegold Ventures Limited or generate 24.49% return on investment over 90 days.

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

Freegold Ventures Limited  vs.  Sumitomo Metal 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 7 (%) 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.

Sumitomo Metal Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Metal Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Freegold Ventures and Sumitomo Metal

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

The idea behind Freegold Ventures Limited and Sumitomo Metal 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.