Correlation Between Aura Minerals and China Gold

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

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

Diversification Opportunities for Aura Minerals and China Gold

0.77

Correlation Coefficient

Aura Minerals  China Gold

Poor diversification

The 3 months correlation between Aura and China is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aura Minerals and China Gold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gold International and Aura Minerals 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 Aura Minerals are associated (or correlated) with China Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gold International has no effect on the direction of Aura Minerals i.e., Aura Minerals and China Gold go up and down completely randomly.

Pair Corralation between Aura Minerals and China Gold

Assuming the 90 days trading horizon Aura Minerals is expected to generate 0.87 times more return on investment than China Gold. However, Aura Minerals is 1.15 times less risky than China Gold. It trades about -0.01 of its potential returns per unit of risk. China Gold International is currently generating about -0.15 per unit of risk. If you would invest  1,749  in Aura Minerals on September 22, 2024 and sell it today you would lose (18.00) from holding Aura Minerals or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Aura Minerals  vs.  China Gold International

Aura Minerals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aura Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

China Gold International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, China Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aura Minerals and China Gold

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

The idea behind Aura Minerals and China Gold International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.