Correlation Between GoldMining and Angold Resources

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

By analyzing existing cross correlation between GoldMining and Angold Resources, you can compare the effects of market volatilities on GoldMining and Angold Resources 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 GoldMining with a short position of Angold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Angold Resources.

Diversification Opportunities for GoldMining and Angold Resources

0.56

Correlation Coefficient

GoldMining  Angold Resources

Very weak diversification

The 3 months correlation between GoldMining and Angold is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Angold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angold Resources and GoldMining 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 GoldMining are associated (or correlated) with Angold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angold Resources has no effect on the direction of GoldMining i.e., GoldMining and Angold Resources go up and down completely randomly.

Pair Corralation between GoldMining and Angold Resources

Given the investment horizon of 90 days GoldMining is expected to under-perform the Angold Resources. But the stock apears to be less risky and, when comparing its historical volatility, GoldMining is 7.6 times less risky than Angold Resources. The stock trades about -0.03 of its potential returns per unit of risk. The Angold Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.20  in Angold Resources on December 1, 2024 and sell it today you would lose (0.90) from holding Angold Resources or give up 28.13% of portfolio value over 90 days.

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

GoldMining  vs.  Angold Resources

GoldMining

Risk-Adjusted Performance

Very Weak

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

Angold Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Angold Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Angold Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoldMining and Angold Resources

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

The idea behind GoldMining and Angold Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..