Correlation Between Liberty Gold and Dynacor Gold

Can any of the company-specific risk be diversified away by investing in both Liberty Gold and Dynacor 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 Liberty Gold and Dynacor Gold 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 Dynacor Gold Mines, you can compare the effects of market volatilities on Liberty Gold and Dynacor 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 Liberty Gold with a short position of Dynacor Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Gold and Dynacor Gold.

Diversification Opportunities for Liberty Gold and Dynacor Gold

0.25

Correlation Coefficient

Liberty Gold  Dynacor Gold

Modest diversification

The 3 months correlation between Liberty and Dynacor is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Gold Corp and Dynacor Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynacor Gold Mines 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 Dynacor Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynacor Gold Mines has no effect on the direction of Liberty Gold i.e., Liberty Gold and Dynacor Gold go up and down completely randomly.

Pair Corralation between Liberty Gold and Dynacor Gold

Assuming the 90 days horizon Liberty Gold Corp is expected to under-perform the Dynacor Gold. In addition to that, Liberty Gold is 1.19 times more volatile than Dynacor Gold Mines. It trades about -0.03 of its total potential returns per unit of risk. Dynacor Gold Mines is currently generating about 0.06 per unit of volatility. If you would invest  214.00  in Dynacor Gold Mines on October 12, 2024 and sell it today you would earn a total of  198.00  from holding Dynacor Gold Mines or generate 92.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.7%
Values	Daily Returns

Liberty Gold Corp  vs.  Dynacor Gold Mines

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dynacor Gold Mines

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Liberty Gold and Dynacor Gold

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

The idea behind Liberty Gold Corp and Dynacor Gold Mines 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.