Correlation Between GoldMining and New Gold

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

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

Diversification Opportunities for GoldMining and New Gold

0.58

Correlation Coefficient

GoldMining  New Gold

Very weak diversification

The 3 months correlation between GoldMining and New is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and New Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New 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 New Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Gold has no effect on the direction of GoldMining i.e., GoldMining and New Gold go up and down completely randomly.

Pair Corralation between GoldMining and New Gold

Given the investment horizon of 90 days GoldMining is expected to generate 10.44 times less return on investment than New Gold. But when comparing it to its historical volatility, GoldMining is 1.48 times less risky than New Gold. It trades about 0.03 of its potential returns per unit of risk. New Gold is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  247.00  in New Gold on December 28, 2024 and sell it today you would earn a total of  113.00  from holding New Gold or generate 45.75% return on investment over 90 days.

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

GoldMining  vs.  New 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.

New Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, New Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoldMining and New Gold

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

The idea behind GoldMining and New 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.