Correlation Between Liberty Gold and Gold Royalty

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

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

Diversification Opportunities for Liberty Gold and Gold Royalty

0.86

Correlation Coefficient

Liberty Gold  Gold Royalty

Very poor diversification

The 3 months correlation between Liberty and Gold is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Gold Corp and Gold Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Royalty Corp and Liberty 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 Liberty Gold Corp are associated (or correlated) with Gold Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Royalty Corp has no effect on the direction of Liberty Gold i.e., Liberty Gold and Gold Royalty go up and down completely randomly.

Pair Corralation between Liberty Gold and Gold Royalty

Assuming the 90 days trading horizon Liberty Gold Corp is expected to generate 1.35 times more return on investment than Gold Royalty. However, Liberty Gold is 1.35 times more volatile than Gold Royalty Corp. It trades about -0.01 of its potential returns per unit of risk. Gold Royalty Corp is currently generating about -0.03 per unit of risk. If you would invest  52.00  in Liberty Gold Corp on October 3, 2024 and sell it today you would lose (26.00) from holding Liberty Gold Corp or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Liberty Gold Corp  vs.  Gold Royalty Corp

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Liberty Gold and Gold Royalty

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

The idea behind Liberty Gold Corp and Gold Royalty 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.