Correlation Between Orezone Gold and Discovery Silver

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

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

Diversification Opportunities for Orezone Gold and Discovery Silver

0.89

Correlation Coefficient

Orezone Gold  Discovery Silver

Very poor diversification

The 3 months correlation between Orezone and Discovery is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Orezone Gold Corp and Discovery Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Silver Corp and Orezone 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 Orezone Gold Corp are associated (or correlated) with Discovery Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Silver Corp has no effect on the direction of Orezone Gold i.e., Orezone Gold and Discovery Silver go up and down completely randomly.

Pair Corralation between Orezone Gold and Discovery Silver

Assuming the 90 days trading horizon Orezone Gold is expected to generate 2.87 times less return on investment than Discovery Silver. But when comparing it to its historical volatility, Orezone Gold Corp is 1.69 times less risky than Discovery Silver. It trades about 0.19 of its potential returns per unit of risk. Discovery Silver Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Discovery Silver Corp on December 23, 2024 and sell it today you would earn a total of  134.00  from holding Discovery Silver Corp or generate 191.43% return on investment over 90 days.

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

Orezone Gold Corp  vs.  Discovery Silver Corp

Orezone Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orezone Gold Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Orezone Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Discovery Silver Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Silver Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Discovery Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orezone Gold and Discovery Silver

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

The idea behind Orezone Gold Corp and Discovery Silver 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.