Correlation Between Gold Fields and Tanzanian Royalty

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

Diversification Opportunities for Gold Fields and Tanzanian Royalty

0.1

Correlation Coefficient

Gold Fields  Tanzanian Royalty

Average diversification

The 3 months correlation between Gold and Tanzanian is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Tanzanian Royalty Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanzanian Royalty 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 Tanzanian Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanzanian Royalty has no effect on the direction of Gold Fields i.e., Gold Fields and Tanzanian Royalty go up and down completely randomly.

Pair Corralation between Gold Fields and Tanzanian Royalty

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.88 times more return on investment than Tanzanian Royalty. However, Gold Fields Ltd is 1.13 times less risky than Tanzanian Royalty. It trades about 0.36 of its potential returns per unit of risk. Tanzanian Royalty Exploration is currently generating about 0.05 per unit of risk. If you would invest  1,292  in Gold Fields Ltd on December 28, 2024 and sell it today you would earn a total of  804.00  from holding Gold Fields Ltd or generate 62.23% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Tanzanian Royalty Exploration

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 28 (%) 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.

Tanzanian Royalty

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tanzanian Royalty Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tanzanian Royalty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gold Fields and Tanzanian Royalty

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

The idea behind Gold Fields Ltd and Tanzanian Royalty 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.