Correlation Between Golden Lake and Aurelia Metals

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

By analyzing existing cross correlation between Golden Lake Exploration and Aurelia Metals Limited, you can compare the effects of market volatilities on Golden Lake and Aurelia Metals 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 Golden Lake with a short position of Aurelia Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Lake and Aurelia Metals.

Diversification Opportunities for Golden Lake and Aurelia Metals

0.42

Correlation Coefficient

Golden Lake  Aurelia Metals

Very weak diversification

The 3 months correlation between Golden and Aurelia is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Golden Lake Exploration and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and Golden Lake 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 Golden Lake Exploration are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of Golden Lake i.e., Golden Lake and Aurelia Metals go up and down completely randomly.

Pair Corralation between Golden Lake and Aurelia Metals

Assuming the 90 days horizon Golden Lake Exploration is expected to generate 7.87 times more return on investment than Aurelia Metals. However, Golden Lake is 7.87 times more volatile than Aurelia Metals Limited. It trades about 0.06 of its potential returns per unit of risk. Aurelia Metals Limited is currently generating about 0.12 per unit of risk. If you would invest  2.72  in Golden Lake Exploration on December 29, 2024 and sell it today you would earn a total of  0.34  from holding Golden Lake Exploration or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Golden Lake Exploration  vs.  Aurelia Metals Limited

Golden Lake Exploration

Risk-Adjusted Performance

Modest

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

Aurelia Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurelia Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Golden Lake and Aurelia Metals

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

The idea behind Golden Lake Exploration and Aurelia Metals Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.