Correlation Between Pilbara Minerals and Troilus Gold

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

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

Diversification Opportunities for Pilbara Minerals and Troilus Gold

0.07

Correlation Coefficient

Pilbara Minerals  Troilus Gold

Significant diversification

The 3 months correlation between Pilbara and Troilus is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited and Troilus Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Troilus Gold Corp and Pilbara 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 Pilbara Minerals Limited are associated (or correlated) with Troilus Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Troilus Gold Corp has no effect on the direction of Pilbara Minerals i.e., Pilbara Minerals and Troilus Gold go up and down completely randomly.

Pair Corralation between Pilbara Minerals and Troilus Gold

Assuming the 90 days horizon Pilbara Minerals Limited is expected to under-perform the Troilus Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pilbara Minerals Limited is 1.39 times less risky than Troilus Gold. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Troilus Gold Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Troilus Gold Corp on October 7, 2024 and sell it today you would lose (9.00) from holding Troilus Gold Corp or give up 30.0% of portfolio value over 90 days.

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

Pilbara Minerals Limited  vs.  Troilus Gold Corp

Pilbara Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Troilus Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Troilus Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Troilus Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pilbara Minerals and Troilus Gold

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

The idea behind Pilbara Minerals Limited and Troilus Gold 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.