Correlation Between Red Moon and Freegold Ventures

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

By analyzing existing cross correlation between Red Moon Resources and Freegold Ventures Limited, you can compare the effects of market volatilities on Red Moon and Freegold Ventures 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 Moon with a short position of Freegold Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Moon and Freegold Ventures.

Diversification Opportunities for Red Moon and Freegold Ventures

0.11

Correlation Coefficient

Red Moon  Freegold Ventures

Average diversification

The 3 months correlation between Red and Freegold is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Red Moon Resources and Freegold Ventures Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freegold Ventures and Red Moon 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 Moon Resources are associated (or correlated) with Freegold Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freegold Ventures has no effect on the direction of Red Moon i.e., Red Moon and Freegold Ventures go up and down completely randomly.

Pair Corralation between Red Moon and Freegold Ventures

Assuming the 90 days horizon Red Moon Resources is expected to under-perform the Freegold Ventures. But the otc stock apears to be less risky and, when comparing its historical volatility, Red Moon Resources is 1.16 times less risky than Freegold Ventures. The otc stock trades about -0.19 of its potential returns per unit of risk. The Freegold Ventures Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Freegold Ventures Limited on December 28, 2024 and sell it today you would earn a total of  11.00  from holding Freegold Ventures Limited or generate 22.0% return on investment over 90 days.

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

Red Moon Resources  vs.  Freegold Ventures Limited

Red Moon Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Moon Resources 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Freegold Ventures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freegold Ventures Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Freegold Ventures reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Moon and Freegold Ventures

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

The idea behind Red Moon Resources and Freegold Ventures Limited 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.