Correlation Between Royal Gold and Gold Fields

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

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

Diversification Opportunities for Royal Gold and Gold Fields

0.96

Correlation Coefficient

Royal Gold  Gold Fields

Almost no diversification

The 3 months correlation between Royal and Gold is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields and Royal 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 Royal Gold are associated (or correlated) with Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Royal Gold i.e., Royal Gold and Gold Fields go up and down completely randomly.

Pair Corralation between Royal Gold and Gold Fields

Given the investment horizon of 90 days Royal Gold is expected to generate 2.46 times less return on investment than Gold Fields. But when comparing it to its historical volatility, Royal Gold is 1.58 times less risky than Gold Fields. It trades about 0.22 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,314  in Gold Fields Ltd on December 27, 2024 and sell it today you would earn a total of  781.50  from holding Gold Fields Ltd or generate 59.47% return on investment over 90 days.

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

Royal Gold  vs.  Gold Fields Ltd

Royal Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Royal Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gold Fields

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Gold and Gold Fields

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

The idea behind Royal Gold and Gold Fields Ltd 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 CEOs Directory module to screen CEOs from public companies around the world.