Correlation Between Nexus Gold and Equity Metals

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

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

Diversification Opportunities for Nexus Gold and Equity Metals

0.04

Correlation Coefficient

Nexus Gold  Equity Metals

Significant diversification

The 3 months correlation between Nexus and Equity is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nexus Gold Corp and Equity Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Metals Corp and Nexus 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 Nexus Gold Corp are associated (or correlated) with Equity Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Metals Corp has no effect on the direction of Nexus Gold i.e., Nexus Gold and Equity Metals go up and down completely randomly.

Pair Corralation between Nexus Gold and Equity Metals

Assuming the 90 days horizon Nexus Gold Corp is expected to generate 5.19 times more return on investment than Equity Metals. However, Nexus Gold is 5.19 times more volatile than Equity Metals Corp. It trades about 0.13 of its potential returns per unit of risk. Equity Metals Corp is currently generating about 0.09 per unit of risk. If you would invest  1.00  in Nexus Gold Corp on December 21, 2024 and sell it today you would earn a total of  0.50  from holding Nexus Gold Corp or generate 50.0% return on investment over 90 days.

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

Nexus Gold Corp  vs.  Equity Metals Corp

Nexus Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexus Gold Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nexus Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Equity Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Metals Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Equity Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexus Gold and Equity Metals

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

The idea behind Nexus Gold Corp and Equity Metals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.