Correlation Between Outcrop Gold and Talon Metals

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

Diversification Opportunities for Outcrop Gold and Talon Metals

0.45

Correlation Coefficient

Outcrop Gold  Talon Metals

Very weak diversification

The 3 months correlation between Outcrop and Talon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Outcrop Gold Corp and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals 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 Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Outcrop Gold i.e., Outcrop Gold and Talon Metals go up and down completely randomly.

Pair Corralation between Outcrop Gold and Talon Metals

Assuming the 90 days horizon Outcrop Gold Corp is expected to generate 1.25 times more return on investment than Talon Metals. However, Outcrop Gold is 1.25 times more volatile than Talon Metals Corp. It trades about 0.01 of its potential returns per unit of risk. Talon Metals Corp is currently generating about -0.04 per unit of risk. If you would invest  25.00  in Outcrop Gold Corp on September 23, 2024 and sell it today you would lose (5.00) from holding Outcrop Gold Corp or give up 20.0% of portfolio value over 90 days.

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

Outcrop Gold Corp  vs.  Talon Metals Corp

Outcrop Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Outcrop Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Talon Metals Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talon Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Talon Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Outcrop Gold and Talon Metals

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

The idea behind Outcrop Gold Corp and Talon 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.