Correlation Between Magna Terra and Fremont Gold

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

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

Diversification Opportunities for Magna Terra and Fremont Gold

-0.5

Correlation Coefficient

Magna Terra  Fremont Gold

Very good diversification

The 3 months correlation between Magna and Fremont is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Magna Terra Minerals and Fremont Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fremont Gold and Magna Terra 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 Terra Minerals are associated (or correlated) with Fremont Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fremont Gold has no effect on the direction of Magna Terra i.e., Magna Terra and Fremont Gold go up and down completely randomly.

Pair Corralation between Magna Terra and Fremont Gold

Assuming the 90 days horizon Magna Terra Minerals is expected to generate 2.61 times more return on investment than Fremont Gold. However, Magna Terra is 2.61 times more volatile than Fremont Gold. It trades about 0.16 of its potential returns per unit of risk. Fremont Gold is currently generating about -0.02 per unit of risk. If you would invest  2.00  in Magna Terra Minerals on October 10, 2024 and sell it today you would earn a total of  2.50  from holding Magna Terra Minerals or generate 125.0% return on investment over 90 days.

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

Magna Terra Minerals  vs.  Fremont Gold

Magna Terra Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Terra Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Magna Terra showed solid returns over the last few months and may actually be approaching a breakup point.

Fremont Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fremont Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Magna Terra and Fremont Gold

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

The idea behind Magna Terra Minerals and Fremont 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..