Correlation Between Maple Gold and Steppe Gold

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

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

Diversification Opportunities for Maple Gold and Steppe Gold

0.41

Correlation Coefficient

Maple Gold  Steppe Gold

Very weak diversification

The 3 months correlation between Maple and Steppe is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Maple Gold Mines and Steppe Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steppe Gold and Maple 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 Maple Gold Mines are associated (or correlated) with Steppe Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steppe Gold has no effect on the direction of Maple Gold i.e., Maple Gold and Steppe Gold go up and down completely randomly.

Pair Corralation between Maple Gold and Steppe Gold

Assuming the 90 days horizon Maple Gold is expected to generate 1.41 times less return on investment than Steppe Gold. In addition to that, Maple Gold is 1.61 times more volatile than Steppe Gold. It trades about 0.04 of its total potential returns per unit of risk. Steppe Gold is currently generating about 0.09 per unit of volatility. If you would invest  42.00  in Steppe Gold on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Steppe Gold or generate 19.05% return on investment over 90 days.

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

Maple Gold Mines  vs.  Steppe Gold

Maple Gold Mines

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Gold Mines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Maple Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Steppe Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steppe Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Steppe Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maple Gold and Steppe Gold

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

The idea behind Maple Gold Mines and Steppe 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.