Correlation Between Gold Fields and Mountain Boy

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

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

Diversification Opportunities for Gold Fields and Mountain Boy

0.02

Correlation Coefficient

Gold Fields  Mountain Boy

Significant diversification

The 3 months correlation between Gold and Mountain is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Mountain Boy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Boy Minerals and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with Mountain Boy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Boy Minerals has no effect on the direction of Gold Fields i.e., Gold Fields and Mountain Boy go up and down completely randomly.

Pair Corralation between Gold Fields and Mountain Boy

Considering the 90-day investment horizon Gold Fields is expected to generate 1.47 times less return on investment than Mountain Boy. But when comparing it to its historical volatility, Gold Fields Ltd is 4.4 times less risky than Mountain Boy. It trades about 0.33 of its potential returns per unit of risk. Mountain Boy Minerals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.98  in Mountain Boy Minerals on December 26, 2024 and sell it today you would earn a total of  0.48  from holding Mountain Boy Minerals or generate 48.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Gold Fields Ltd  vs.  Mountain Boy Minerals

Gold Fields

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Mountain Boy Minerals

Risk-Adjusted Performance

OK

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

Pair Trading with Gold Fields and Mountain Boy

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

The idea behind Gold Fields Ltd and Mountain Boy Minerals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.