Correlation Between Magnum Goldcorp and New Destiny

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

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

Diversification Opportunities for Magnum Goldcorp and New Destiny

-0.21

Correlation Coefficient

Magnum Goldcorp  New Destiny

Very good diversification

The 3 months correlation between Magnum and New is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Magnum Goldcorp and New Destiny Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Destiny Mining 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 New Destiny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Destiny Mining has no effect on the direction of Magnum Goldcorp i.e., Magnum Goldcorp and New Destiny go up and down completely randomly.

Pair Corralation between Magnum Goldcorp and New Destiny

Assuming the 90 days horizon Magnum Goldcorp is expected to generate 4.4 times less return on investment than New Destiny. But when comparing it to its historical volatility, Magnum Goldcorp is 1.63 times less risky than New Destiny. It trades about 0.04 of its potential returns per unit of risk. New Destiny Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3.00  in New Destiny Mining on December 28, 2024 and sell it today you would earn a total of  2.00  from holding New Destiny Mining or generate 66.67% return on investment over 90 days.

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

Magnum Goldcorp  vs.  New Destiny Mining

Magnum Goldcorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magnum Goldcorp are ranked lower than 3 (%) 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.

New Destiny Mining

Risk-Adjusted Performance

OK

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

Pair Trading with Magnum Goldcorp and New Destiny

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

The idea behind Magnum Goldcorp and New Destiny 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.