Correlation Between Leading Edge and Q Gold
Can any of the company-specific risk be diversified away by investing in both Leading Edge and Q 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 Leading Edge and Q Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and Q Gold Resources, you can compare the effects of market volatilities on Leading Edge and Q 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 Leading Edge with a short position of Q Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Q Gold.
Diversification Opportunities for Leading Edge and Q Gold
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leading and QGR is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Q Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q Gold Resources and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Q Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q Gold Resources has no effect on the direction of Leading Edge i.e., Leading Edge and Q Gold go up and down completely randomly.
Pair Corralation between Leading Edge and Q Gold
Assuming the 90 days horizon Leading Edge Materials is expected to generate 0.47 times more return on investment than Q Gold. However, Leading Edge Materials is 2.11 times less risky than Q Gold. It trades about -0.07 of its potential returns per unit of risk. Q Gold Resources is currently generating about -0.06 per unit of risk. If you would invest 11.00 in Leading Edge Materials on October 25, 2024 and sell it today you would lose (2.00) from holding Leading Edge Materials or give up 18.18% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Leading Edge Materials vs. Q Gold Resources
Performance |
Timeline |
Leading Edge Materials |
Q Gold Resources |
Leading Edge and Q Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Leading Edge and Q Gold
The main advantage of trading using opposite Leading Edge and Q Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, Q 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 Q Gold will offset losses from the drop in Q Gold's long position.Leading Edge vs. Hannan Metals | ||
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Check out your portfolio center.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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