Correlation Between Exploits Discovery and Cerrado Gold

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

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

Diversification Opportunities for Exploits Discovery and Cerrado Gold

-0.33

Correlation Coefficient

Exploits Discovery  Cerrado Gold

Very good diversification

The 3 months correlation between Exploits and Cerrado is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Exploits Discovery Corp and Cerrado Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerrado Gold and Exploits Discovery 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 Exploits Discovery Corp are associated (or correlated) with Cerrado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerrado Gold has no effect on the direction of Exploits Discovery i.e., Exploits Discovery and Cerrado Gold go up and down completely randomly.

Pair Corralation between Exploits Discovery and Cerrado Gold

Assuming the 90 days horizon Exploits Discovery is expected to generate 10.28 times less return on investment than Cerrado Gold. In addition to that, Exploits Discovery is 1.46 times more volatile than Cerrado Gold. It trades about 0.01 of its total potential returns per unit of risk. Cerrado Gold is currently generating about 0.13 per unit of volatility. If you would invest  23.00  in Cerrado Gold on December 30, 2024 and sell it today you would earn a total of  10.00  from holding Cerrado Gold or generate 43.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Exploits Discovery Corp  vs.  Cerrado Gold

Exploits Discovery Corp

Risk-Adjusted Performance

Very Weak

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

Cerrado Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cerrado Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cerrado Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exploits Discovery and Cerrado Gold

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

The idea behind Exploits Discovery Corp and Cerrado 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.