Correlation Between Montage Gold and O3 Mining Inc

Can any of the company-specific risk be diversified away by investing in both Montage Gold and O3 Mining Inc 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 Montage Gold and O3 Mining Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Montage Gold Corp and O3 Mining, you can compare the effects of market volatilities on Montage Gold and O3 Mining Inc 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 Montage Gold with a short position of O3 Mining Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montage Gold and O3 Mining Inc.

Diversification Opportunities for Montage Gold and O3 Mining Inc

-0.02

Correlation Coefficient

Montage Gold  O3 Mining Inc

Good diversification

The 3 months correlation between Montage and OIII is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Montage Gold Corp and O3 Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on O3 Mining Inc and Montage 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 Montage Gold Corp are associated (or correlated) with O3 Mining Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of O3 Mining Inc has no effect on the direction of Montage Gold i.e., Montage Gold and O3 Mining Inc go up and down completely randomly.

Pair Corralation between Montage Gold and O3 Mining Inc

Assuming the 90 days horizon Montage Gold is expected to generate 5.2 times less return on investment than O3 Mining Inc. But when comparing it to its historical volatility, Montage Gold Corp is 2.77 times less risky than O3 Mining Inc. It trades about 0.07 of its potential returns per unit of risk. O3 Mining is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  102.00  in O3 Mining on December 3, 2024 and sell it today you would earn a total of  65.00  from holding O3 Mining or generate 63.73% return on investment over 90 days.

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

Montage Gold Corp  vs.  O3 Mining

Montage Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Montage Gold Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Montage Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

O3 Mining Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in O3 Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, O3 Mining Inc showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Montage Gold and O3 Mining Inc

The main advantage of trading using opposite Montage Gold and O3 Mining Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montage Gold position performs unexpectedly, O3 Mining Inc 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 O3 Mining Inc will offset losses from the drop in O3 Mining Inc's long position.

The idea behind Montage Gold Corp and O3 Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.