Correlation Between Klondike Gold and Norsemont Mining

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

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

Diversification Opportunities for Klondike Gold and Norsemont Mining

-0.53

Correlation Coefficient

Klondike Gold  Norsemont Mining

Excellent diversification

The 3 months correlation between Klondike and Norsemont is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Klondike Gold Corp and Norsemont Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsemont Mining and Klondike Gold 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 Klondike Gold Corp 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 Klondike Gold i.e., Klondike Gold and Norsemont Mining go up and down completely randomly.

Pair Corralation between Klondike Gold and Norsemont Mining

Assuming the 90 days horizon Klondike Gold Corp is expected to under-perform the Norsemont Mining. But the otc stock apears to be less risky and, when comparing its historical volatility, Klondike Gold Corp is 1.36 times less risky than Norsemont Mining. The otc stock trades about 0.0 of its potential returns per unit of risk. The Norsemont Mining is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7.60  in Norsemont Mining on September 3, 2024 and sell it today you would earn a total of  10.40  from holding Norsemont Mining or generate 136.84% return on investment over 90 days.

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

Klondike Gold Corp  vs.  Norsemont Mining

Klondike Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klondike Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Klondike Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Norsemont Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norsemont Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norsemont Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Klondike Gold and Norsemont Mining

The main advantage of trading using opposite Klondike Gold and Norsemont Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Klondike Gold 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 Klondike Gold Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.