Correlation Between GoldMining and Galiano Gold

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

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

Diversification Opportunities for GoldMining and Galiano Gold

0.6

Correlation Coefficient

GoldMining  Galiano Gold

Poor diversification

The 3 months correlation between GoldMining and Galiano is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Galiano Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galiano Gold 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 Galiano Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galiano Gold has no effect on the direction of GoldMining i.e., GoldMining and Galiano Gold go up and down completely randomly.

Pair Corralation between GoldMining and Galiano Gold

Given the investment horizon of 90 days GoldMining is expected to generate 1.23 times less return on investment than Galiano Gold. But when comparing it to its historical volatility, GoldMining is 1.66 times less risky than Galiano Gold. It trades about 0.03 of its potential returns per unit of risk. Galiano Gold is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  122.00  in Galiano Gold on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Galiano Gold or generate 0.82% return on investment over 90 days.

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

GoldMining  vs.  Galiano Gold

GoldMining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Galiano Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galiano Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Galiano Gold is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GoldMining and Galiano Gold

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

The idea behind GoldMining and Galiano 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.