Correlation Between Mexican Gold and Newport Gold

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

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

Diversification Opportunities for Mexican Gold and Newport Gold

0.25

Correlation Coefficient

Mexican Gold  Newport Gold

Modest diversification

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

Pair Corralation between Mexican Gold and Newport Gold

Assuming the 90 days horizon Mexican Gold Mining is expected to under-perform the Newport Gold. But the otc stock apears to be less risky and, when comparing its historical volatility, Mexican Gold Mining is 1.96 times less risky than Newport Gold. The otc stock trades about -0.06 of its potential returns per unit of risk. The Newport Gold is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.19  in Newport Gold on September 4, 2024 and sell it today you would earn a total of  0.08  from holding Newport Gold or generate 42.11% return on investment over 90 days.

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

Mexican Gold Mining  vs.  Newport Gold

Mexican Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mexican Gold Mining 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Newport Gold

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Mexican Gold and Newport Gold

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

The idea behind Mexican Gold Mining and Newport Gold 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.