Correlation Between GoldMining and Mesabi Trust

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

By analyzing existing cross correlation between GoldMining and Mesabi Trust, you can compare the effects of market volatilities on GoldMining and Mesabi Trust 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 Mesabi Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Mesabi Trust.

Diversification Opportunities for GoldMining and Mesabi Trust

-0.12

Correlation Coefficient

GoldMining  Mesabi Trust

Good diversification

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

Pair Corralation between GoldMining and Mesabi Trust

Given the investment horizon of 90 days GoldMining is expected to under-perform the Mesabi Trust. But the stock apears to be less risky and, when comparing its historical volatility, GoldMining is 1.45 times less risky than Mesabi Trust. The stock trades about 0.0 of its potential returns per unit of risk. The Mesabi Trust is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,695  in Mesabi Trust on September 3, 2024 and sell it today you would earn a total of  1,081  from holding Mesabi Trust or generate 63.78% return on investment over 90 days.

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

GoldMining  vs.  Mesabi Trust

GoldMining

Risk-Adjusted Performance

0 of 100

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.

Mesabi Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoldMining and Mesabi Trust

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

The idea behind GoldMining and Mesabi Trust 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.