Correlation Between MAS Gold and CANEX Metals

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

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

Diversification Opportunities for MAS Gold and CANEX Metals

0.4

Correlation Coefficient

MAS Gold  CANEX Metals

Very weak diversification

The 3 months correlation between MAS and CANEX is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MAS Gold Corp and CANEX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANEX Metals and MAS 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 MAS Gold Corp are associated (or correlated) with CANEX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANEX Metals has no effect on the direction of MAS Gold i.e., MAS Gold and CANEX Metals go up and down completely randomly.

Pair Corralation between MAS Gold and CANEX Metals

Assuming the 90 days horizon MAS Gold Corp is expected to generate 2.16 times more return on investment than CANEX Metals. However, MAS Gold is 2.16 times more volatile than CANEX Metals. It trades about 0.11 of its potential returns per unit of risk. CANEX Metals is currently generating about 0.04 per unit of risk. If you would invest  1.00  in MAS Gold Corp on September 23, 2024 and sell it today you would earn a total of  1.00  from holding MAS Gold Corp or generate 100.0% return on investment over 90 days.

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

MAS Gold Corp  vs.  CANEX Metals

MAS Gold Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAS Gold Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MAS Gold showed solid returns over the last few months and may actually be approaching a breakup point.

CANEX Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CANEX Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CANEX Metals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with MAS Gold and CANEX Metals

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

The idea behind MAS Gold Corp and CANEX Metals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.