Correlation Between Gold Springs and Norsemont Mining

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

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

Diversification Opportunities for Gold Springs and Norsemont Mining

0.66

Correlation Coefficient

Gold Springs  Norsemont Mining

Poor diversification

The 3 months correlation between Gold and Norsemont is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gold Springs Resource and Norsemont Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsemont Mining and Gold Springs 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 Gold Springs Resource are associated (or correlated) with Norsemont Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsemont Mining has no effect on the direction of Gold Springs i.e., Gold Springs and Norsemont Mining go up and down completely randomly.

Pair Corralation between Gold Springs and Norsemont Mining

Assuming the 90 days horizon Gold Springs Resource is expected to generate 1.15 times more return on investment than Norsemont Mining. However, Gold Springs is 1.15 times more volatile than Norsemont Mining. It trades about -0.03 of its potential returns per unit of risk. Norsemont Mining is currently generating about -0.12 per unit of risk. If you would invest  6.80  in Gold Springs Resource on November 29, 2024 and sell it today you would lose (1.70) from holding Gold Springs Resource or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Gold Springs Resource  vs.  Norsemont Mining

Gold Springs Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gold Springs Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Norsemont Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norsemont Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gold Springs and Norsemont Mining

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

The idea behind Gold Springs Resource and Norsemont Mining 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.