Correlation Between SPTSX Dividend and Newcore Gold

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

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

Diversification Opportunities for SPTSX Dividend and Newcore Gold

-0.15

Correlation Coefficient

SPTSX Dividend  Newcore Gold

Good diversification

The 3 months correlation between SPTSX and Newcore is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Newcore Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcore Gold and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with Newcore Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcore Gold has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Newcore Gold go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Newcore Gold

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to under-perform the Newcore Gold. But the index apears to be less risky and, when comparing its historical volatility, SPTSX Dividend Aristocrats is 7.62 times less risky than Newcore Gold. The index trades about -0.31 of its potential returns per unit of risk. The Newcore Gold is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Newcore Gold on October 7, 2024 and sell it today you would earn a total of  2.00  from holding Newcore Gold or generate 6.67% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Newcore Gold

Pair Trading with SPTSX Dividend and Newcore Gold

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

The idea behind SPTSX Dividend Aristocrats and Newcore 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.