Correlation Between Royal Gold and Newmont Goldcorp

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

By analyzing existing cross correlation between Royal Gold and Newmont Goldcorp Corp, you can compare the effects of market volatilities on Royal Gold and Newmont Goldcorp 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 Newmont Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Gold and Newmont Goldcorp.

Diversification Opportunities for Royal Gold and Newmont Goldcorp

0.89

Correlation Coefficient

Royal Gold  Newmont Goldcorp

Very poor diversification

The 3 months correlation between Royal and Newmont is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Newmont Goldcorp Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont Goldcorp Corp 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 Newmont Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont Goldcorp Corp has no effect on the direction of Royal Gold i.e., Royal Gold and Newmont Goldcorp go up and down completely randomly.

Pair Corralation between Royal Gold and Newmont Goldcorp

Given the investment horizon of 90 days Royal Gold is expected to generate 1.26 times less return on investment than Newmont Goldcorp. But when comparing it to its historical volatility, Royal Gold is 1.36 times less risky than Newmont Goldcorp. It trades about 0.25 of its potential returns per unit of risk. Newmont Goldcorp Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,678  in Newmont Goldcorp Corp on December 28, 2024 and sell it today you would earn a total of  1,130  from holding Newmont Goldcorp Corp or generate 30.72% return on investment over 90 days.

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

Royal Gold  vs.  Newmont Goldcorp Corp

Royal Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 19 (%) 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.

Newmont Goldcorp Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newmont Goldcorp Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Newmont Goldcorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Gold and Newmont Goldcorp

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

The idea behind Royal Gold and Newmont Goldcorp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.