Correlation Between Kinross Gold and Solstice Gold

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

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

Diversification Opportunities for Kinross Gold and Solstice Gold

0.03

Correlation Coefficient

Kinross Gold  Solstice Gold

Significant diversification

The 3 months correlation between Kinross and Solstice is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kinross Gold and Solstice Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstice Gold Corp and Kinross 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 Kinross Gold are associated (or correlated) with Solstice Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstice Gold Corp has no effect on the direction of Kinross Gold i.e., Kinross Gold and Solstice Gold go up and down completely randomly.

Pair Corralation between Kinross Gold and Solstice Gold

Considering the 90-day investment horizon Kinross Gold is expected to generate 31.83 times less return on investment than Solstice Gold. But when comparing it to its historical volatility, Kinross Gold is 12.23 times less risky than Solstice Gold. It trades about 0.03 of its potential returns per unit of risk. Solstice Gold Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.05  in Solstice Gold Corp on October 8, 2024 and sell it today you would lose (0.55) from holding Solstice Gold Corp or give up 26.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Kinross Gold  vs.  Solstice Gold Corp

Kinross Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kinross Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Kinross Gold is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Solstice Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstice Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Solstice Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinross Gold and Solstice Gold

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

The idea behind Kinross Gold and Solstice 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.