Correlation Between GoldMining and Gold Royalty

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

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

Diversification Opportunities for GoldMining and Gold Royalty

0.12

Correlation Coefficient

GoldMining  Gold Royalty

Average diversification

The 3 months correlation between GoldMining and Gold is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Gold Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Royalty Corp 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 Gold Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Royalty Corp has no effect on the direction of GoldMining i.e., GoldMining and Gold Royalty go up and down completely randomly.

Pair Corralation between GoldMining and Gold Royalty

Given the investment horizon of 90 days GoldMining is expected to under-perform the Gold Royalty. But the stock apears to be less risky and, when comparing its historical volatility, GoldMining is 1.1 times less risky than Gold Royalty. The stock trades about -0.05 of its potential returns per unit of risk. The Gold Royalty Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  129.00  in Gold Royalty Corp on November 29, 2024 and sell it today you would earn a total of  10.00  from holding Gold Royalty Corp or generate 7.75% return on investment over 90 days.

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

GoldMining  vs.  Gold Royalty Corp

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 latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Gold Royalty Corp

Risk-Adjusted Performance

Insignificant

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

Pair Trading with GoldMining and Gold Royalty

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

The idea behind GoldMining and Gold Royalty Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.