Correlation Between Romios Gold and Valeura Energy

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

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

Diversification Opportunities for Romios Gold and Valeura Energy

-0.31

Correlation Coefficient

Romios Gold  Valeura Energy

Very good diversification

The 3 months correlation between Romios and Valeura is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Romios Gold Resources and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and Romios 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 Romios Gold Resources are associated (or correlated) with Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Romios Gold i.e., Romios Gold and Valeura Energy go up and down completely randomly.

Pair Corralation between Romios Gold and Valeura Energy

Given the investment horizon of 90 days Romios Gold Resources is expected to generate 6.14 times more return on investment than Valeura Energy. However, Romios Gold is 6.14 times more volatile than Valeura Energy. It trades about 0.1 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.07 per unit of risk. If you would invest  4.00  in Romios Gold Resources on September 26, 2024 and sell it today you would lose (2.50) from holding Romios Gold Resources or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Romios Gold Resources  vs.  Valeura Energy

Romios Gold Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Romios Gold Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Romios Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Valeura Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Valeura Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Romios Gold and Valeura Energy

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

The idea behind Romios Gold Resources and Valeura Energy 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.