Correlation Between Magnum Goldcorp and Asiabasemetals

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

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

Diversification Opportunities for Magnum Goldcorp and Asiabasemetals

0.19

Correlation Coefficient

Magnum Goldcorp  Asiabasemetals

Average diversification

The 3 months correlation between Magnum and Asiabasemetals is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Magnum Goldcorp and Asiabasemetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiabasemetals and Magnum Goldcorp 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 Magnum Goldcorp are associated (or correlated) with Asiabasemetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiabasemetals has no effect on the direction of Magnum Goldcorp i.e., Magnum Goldcorp and Asiabasemetals go up and down completely randomly.

Pair Corralation between Magnum Goldcorp and Asiabasemetals

Assuming the 90 days horizon Magnum Goldcorp is expected to generate 1.42 times less return on investment than Asiabasemetals. In addition to that, Magnum Goldcorp is 1.11 times more volatile than Asiabasemetals. It trades about 0.07 of its total potential returns per unit of risk. Asiabasemetals is currently generating about 0.11 per unit of volatility. If you would invest  5.50  in Asiabasemetals on December 5, 2024 and sell it today you would earn a total of  2.50  from holding Asiabasemetals or generate 45.45% return on investment over 90 days.

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

Magnum Goldcorp  vs.  Asiabasemetals

Magnum Goldcorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magnum Goldcorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Magnum Goldcorp showed solid returns over the last few months and may actually be approaching a breakup point.

Asiabasemetals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asiabasemetals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Asiabasemetals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnum Goldcorp and Asiabasemetals

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

The idea behind Magnum Goldcorp and Asiabasemetals 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 Transaction History module to view history of all your transactions and understand their impact on performance.