Correlation Between Gold Fields and Royal Gold

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

Diversification Opportunities for Gold Fields and Royal Gold

0.96

Correlation Coefficient

Gold Fields  Royal Gold

Almost no diversification

The 3 months correlation between Gold and Royal is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Royal Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Gold 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 Royal Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Gold has no effect on the direction of Gold Fields i.e., Gold Fields and Royal Gold go up and down completely randomly.

Pair Corralation between Gold Fields and Royal Gold

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 1.58 times more return on investment than Royal Gold. However, Gold Fields is 1.58 times more volatile than Royal Gold. It trades about 0.34 of its potential returns per unit of risk. Royal Gold is currently generating about 0.22 per unit of risk. If you would invest  1,314  in Gold Fields Ltd on December 27, 2024 and sell it today you would earn a total of  781.50  from holding Gold Fields Ltd or generate 59.47% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Royal Gold

Gold Fields

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 26 (%) 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.

Royal Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Royal Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and Royal Gold

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

The idea behind Gold Fields Ltd and Royal Gold 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.