Correlation Between Orezone Gold and Elemental Royalties

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

Diversification Opportunities for Orezone Gold and Elemental Royalties

0.75

Correlation Coefficient

Orezone Gold  Elemental Royalties

Poor diversification

The 3 months correlation between Orezone and Elemental is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Orezone Gold Corp and Elemental Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elemental Royalties 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 Elemental Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elemental Royalties Corp has no effect on the direction of Orezone Gold i.e., Orezone Gold and Elemental Royalties go up and down completely randomly.

Pair Corralation between Orezone Gold and Elemental Royalties

Assuming the 90 days trading horizon Orezone Gold Corp is expected to generate 1.4 times more return on investment than Elemental Royalties. However, Orezone Gold is 1.4 times more volatile than Elemental Royalties Corp. It trades about 0.24 of its potential returns per unit of risk. Elemental Royalties Corp is currently generating about 0.13 per unit of risk. If you would invest  63.00  in Orezone Gold Corp on December 28, 2024 and sell it today you would earn a total of  41.00  from holding Orezone Gold Corp or generate 65.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Orezone Gold Corp  vs.  Elemental Royalties Corp

Orezone Gold Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orezone Gold Corp are ranked lower than 18 (%) 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.

Elemental Royalties Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elemental Royalties Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Elemental Royalties showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orezone Gold and Elemental Royalties

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

The idea behind Orezone Gold Corp and Elemental Royalties 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.