Correlation Between Mountain Boy and GoGold Resources

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

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

Diversification Opportunities for Mountain Boy and GoGold Resources

0.28

Correlation Coefficient

Mountain Boy  GoGold Resources

Modest diversification

The 3 months correlation between Mountain and GoGold is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Boy Minerals and GoGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoGold Resources and Mountain Boy 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 Mountain Boy Minerals are associated (or correlated) with GoGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoGold Resources has no effect on the direction of Mountain Boy i.e., Mountain Boy and GoGold Resources go up and down completely randomly.

Pair Corralation between Mountain Boy and GoGold Resources

Assuming the 90 days horizon Mountain Boy Minerals is expected to generate 3.54 times more return on investment than GoGold Resources. However, Mountain Boy is 3.54 times more volatile than GoGold Resources. It trades about 0.1 of its potential returns per unit of risk. GoGold Resources is currently generating about 0.25 per unit of risk. If you would invest  0.98  in Mountain Boy Minerals on December 30, 2024 and sell it today you would earn a total of  0.42  from holding Mountain Boy Minerals or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Mountain Boy Minerals  vs.  GoGold Resources

Mountain Boy Minerals

Risk-Adjusted Performance

OK

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

GoGold Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GoGold Resources are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, GoGold Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mountain Boy and GoGold Resources

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

The idea behind Mountain Boy Minerals and GoGold Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.