Correlation Between New Gold and Tanzanian Royalty

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

By analyzing existing cross correlation between New Gold and Tanzanian Royalty Exploration, you can compare the effects of market volatilities on New Gold and Tanzanian Royalty 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 Tanzanian Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Gold and Tanzanian Royalty.

Diversification Opportunities for New Gold and Tanzanian Royalty

0.69

Correlation Coefficient

New Gold  Tanzanian Royalty

Poor diversification

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

Pair Corralation between New Gold and Tanzanian Royalty

Considering the 90-day investment horizon New Gold is expected to generate 1.19 times more return on investment than Tanzanian Royalty. However, New Gold is 1.19 times more volatile than Tanzanian Royalty Exploration. It trades about 0.09 of its potential returns per unit of risk. Tanzanian Royalty Exploration is currently generating about -0.01 per unit of risk. If you would invest  133.00  in New Gold on October 7, 2024 and sell it today you would earn a total of  126.00  from holding New Gold or generate 94.74% 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.  Tanzanian Royalty Exploration

New Gold

Risk-Adjusted Performance

0 of 100

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.

Tanzanian Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanzanian Royalty Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with New Gold and Tanzanian Royalty

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

The idea behind New Gold and Tanzanian Royalty Exploration 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.