Correlation Between Labrador Gold and US Gold

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

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

Diversification Opportunities for Labrador Gold and US Gold

-0.81

Correlation Coefficient

Labrador Gold  US Gold

Pay attention - limited upside

The 3 months correlation between Labrador and USAU is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Gold Corp and US Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Gold Corp and Labrador 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 Labrador Gold Corp are associated (or correlated) with US Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Gold Corp has no effect on the direction of Labrador Gold i.e., Labrador Gold and US Gold go up and down completely randomly.

Pair Corralation between Labrador Gold and US Gold

Assuming the 90 days horizon Labrador Gold Corp is expected to under-perform the US Gold. In addition to that, Labrador Gold is 1.91 times more volatile than US Gold Corp. It trades about -0.03 of its total potential returns per unit of risk. US Gold Corp is currently generating about 0.18 per unit of volatility. If you would invest  525.00  in US Gold Corp on September 5, 2024 and sell it today you would earn a total of  273.00  from holding US Gold Corp or generate 52.0% return on investment over 90 days.

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

Labrador Gold Corp  vs.  US Gold Corp

Labrador Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

US Gold Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, US Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Labrador Gold and US Gold

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

The idea behind Labrador Gold Corp and US Gold Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.