Correlation Between Red Pine and Bravada Gold

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

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

Diversification Opportunities for Red Pine and Bravada Gold

0.76

Correlation Coefficient

Red Pine  Bravada Gold

Poor diversification

The 3 months correlation between Red and Bravada is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Bravada Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravada Gold and Red Pine 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 Red Pine Exploration are associated (or correlated) with Bravada Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravada Gold has no effect on the direction of Red Pine i.e., Red Pine and Bravada Gold go up and down completely randomly.

Pair Corralation between Red Pine and Bravada Gold

Assuming the 90 days horizon Red Pine is expected to generate 1.52 times less return on investment than Bravada Gold. But when comparing it to its historical volatility, Red Pine Exploration is 1.29 times less risky than Bravada Gold. It trades about 0.14 of its potential returns per unit of risk. Bravada Gold is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1.17  in Bravada Gold on October 22, 2024 and sell it today you would earn a total of  0.23  from holding Bravada Gold or generate 19.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Red Pine Exploration  vs.  Bravada Gold

Red Pine Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Pine Exploration 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 basic indicators 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.

Bravada Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bravada Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bravada Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Pine and Bravada Gold

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

The idea behind Red Pine Exploration and Bravada Gold 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.