Correlation Between Gold Royalty and Lumina Gold

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

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

Diversification Opportunities for Gold Royalty and Lumina Gold

0.85

Correlation Coefficient

Gold Royalty  Lumina Gold

Very poor diversification

The 3 months correlation between Gold and Lumina is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gold Royalty Corp and Lumina Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumina Gold Corp and Gold Royalty 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 Royalty Corp are associated (or correlated) with Lumina Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumina Gold Corp has no effect on the direction of Gold Royalty i.e., Gold Royalty and Lumina Gold go up and down completely randomly.

Pair Corralation between Gold Royalty and Lumina Gold

Given the investment horizon of 90 days Gold Royalty Corp is expected to generate 0.91 times more return on investment than Lumina Gold. However, Gold Royalty Corp is 1.1 times less risky than Lumina Gold. It trades about -0.06 of its potential returns per unit of risk. Lumina Gold Corp is currently generating about -0.07 per unit of risk. If you would invest  135.00  in Gold Royalty Corp on October 3, 2024 and sell it today you would lose (14.00) from holding Gold Royalty Corp or give up 10.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Gold Royalty Corp  vs.  Lumina Gold Corp

Gold Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lumina Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumina Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Gold Royalty and Lumina Gold

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

The idea behind Gold Royalty Corp and Lumina Gold 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.