Correlation Between Nexus Gold and Falcon Gold

Can any of the company-specific risk be diversified away by investing in both Nexus Gold and Falcon 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 Nexus Gold and Falcon Gold 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 Falcon Gold Corp, you can compare the effects of market volatilities on Nexus Gold and Falcon 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 Nexus Gold with a short position of Falcon Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexus Gold and Falcon Gold.

Diversification Opportunities for Nexus Gold and Falcon Gold

0.38

Correlation Coefficient

Nexus Gold  Falcon Gold

Weak diversification

The 3 months correlation between Nexus and Falcon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nexus Gold Corp and Falcon Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Gold 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 Falcon Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Gold Corp has no effect on the direction of Nexus Gold i.e., Nexus Gold and Falcon Gold go up and down completely randomly.

Pair Corralation between Nexus Gold and Falcon Gold

Assuming the 90 days horizon Nexus Gold Corp is expected to generate 5.87 times more return on investment than Falcon Gold. However, Nexus Gold is 5.87 times more volatile than Falcon Gold Corp. It trades about 0.18 of its potential returns per unit of risk. Falcon Gold Corp is currently generating about -0.07 per unit of risk. If you would invest  1.00  in Nexus Gold Corp on October 9, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nexus Gold Corp  vs.  Falcon Gold Corp

Nexus Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexus Gold Corp are ranked lower than 7 (%) 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.

Falcon Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nexus Gold and Falcon Gold

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

The idea behind Nexus Gold Corp and Falcon 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.