Correlation Between Lundin Gold and Gold Reserve

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

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

Diversification Opportunities for Lundin Gold and Gold Reserve

0.8

Correlation Coefficient

Lundin Gold  Gold Reserve

Very poor diversification

The 3 months correlation between Lundin and Gold is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Gold and Gold Reserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Reserve and Lundin 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 Lundin Gold are associated (or correlated) with Gold Reserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Reserve has no effect on the direction of Lundin Gold i.e., Lundin Gold and Gold Reserve go up and down completely randomly.

Pair Corralation between Lundin Gold and Gold Reserve

Assuming the 90 days horizon Lundin Gold is expected to generate 0.5 times more return on investment than Gold Reserve. However, Lundin Gold is 1.99 times less risky than Gold Reserve. It trades about 0.23 of its potential returns per unit of risk. Gold Reserve is currently generating about 0.09 per unit of risk. If you would invest  2,128  in Lundin Gold on December 28, 2024 and sell it today you would earn a total of  917.00  from holding Lundin Gold or generate 43.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Lundin Gold  vs.  Gold Reserve

Lundin Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lundin Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Gold Reserve

Risk-Adjusted Performance

OK

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

Pair Trading with Lundin Gold and Gold Reserve

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

The idea behind Lundin Gold and Gold Reserve 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.