Correlation Between New Gold and Aris Mining

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

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

Diversification Opportunities for New Gold and Aris Mining

0.69

Correlation Coefficient

New Gold  Aris Mining

Poor diversification

The 3 months correlation between New and Aris is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding New Gold and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining and New 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 New Gold are associated (or correlated) with Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of New Gold i.e., New Gold and Aris Mining go up and down completely randomly.

Pair Corralation between New Gold and Aris Mining

Considering the 90-day investment horizon New Gold is expected to generate 1.1 times more return on investment than Aris Mining. However, New Gold is 1.1 times more volatile than Aris Mining. It trades about 0.07 of its potential returns per unit of risk. Aris Mining is currently generating about 0.03 per unit of risk. If you would invest  167.00  in New Gold on December 4, 2024 and sell it today you would earn a total of  100.00  from holding New Gold or generate 59.88% return on investment over 90 days.

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

New Gold  vs.  Aris Mining

New Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, New Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Aris Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aris Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Aris Mining is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with New Gold and Aris Mining

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

The idea behind New Gold and Aris 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.