Correlation Between Outcrop Gold and Eskay Mining

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

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

Diversification Opportunities for Outcrop Gold and Eskay Mining

0.27

Correlation Coefficient

Outcrop Gold  Eskay Mining

Modest diversification

The 3 months correlation between Outcrop and Eskay is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Outcrop Gold Corp and Eskay Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eskay Mining Corp and Outcrop 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 Outcrop Gold Corp are associated (or correlated) with Eskay Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eskay Mining Corp has no effect on the direction of Outcrop Gold i.e., Outcrop Gold and Eskay Mining go up and down completely randomly.

Pair Corralation between Outcrop Gold and Eskay Mining

Assuming the 90 days horizon Outcrop Gold Corp is expected to under-perform the Eskay Mining. In addition to that, Outcrop Gold is 1.22 times more volatile than Eskay Mining Corp. It trades about -0.02 of its total potential returns per unit of risk. Eskay Mining Corp is currently generating about 0.1 per unit of volatility. If you would invest  19.00  in Eskay Mining Corp on December 4, 2024 and sell it today you would earn a total of  4.00  from holding Eskay Mining Corp or generate 21.05% return on investment over 90 days.

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

Outcrop Gold Corp  vs.  Eskay Mining Corp

Outcrop Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Outcrop Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Outcrop Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eskay Mining Corp

Risk-Adjusted Performance

OK

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

Pair Trading with Outcrop Gold and Eskay Mining

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

The idea behind Outcrop Gold Corp and Eskay Mining 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.