Correlation Between Magna Gold and Dacian Gold

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

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

Diversification Opportunities for Magna Gold and Dacian Gold

0.0

Correlation Coefficient

Magna Gold  Dacian Gold

Pay attention - limited upside

The 3 months correlation between Magna and Dacian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Magna Gold Corp and Dacian Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dacian Gold Limited and Magna 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 Magna Gold Corp are associated (or correlated) with Dacian Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dacian Gold Limited has no effect on the direction of Magna Gold i.e., Magna Gold and Dacian Gold go up and down completely randomly.

Pair Corralation between Magna Gold and Dacian Gold

Assuming the 90 days horizon Magna Gold Corp is expected to generate 4.8 times more return on investment than Dacian Gold. However, Magna Gold is 4.8 times more volatile than Dacian Gold Limited. It trades about 0.02 of its potential returns per unit of risk. Dacian Gold Limited is currently generating about 0.06 per unit of risk. If you would invest  2.20  in Magna Gold Corp on October 4, 2024 and sell it today you would lose (1.40) from holding Magna Gold Corp or give up 63.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.24%
Values	Daily Returns

Magna Gold Corp  vs.  Dacian Gold Limited

Magna Gold Corp

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Magna Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Magna Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dacian Gold Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dacian Gold Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dacian Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Magna Gold and Dacian Gold

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

The idea behind Magna Gold Corp and Dacian Gold Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.