Correlation Between Royal Gold and Vista Gold

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

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

Diversification Opportunities for Royal Gold and Vista Gold

0.55

Correlation Coefficient

Royal Gold  Vista Gold

Very weak diversification

The 3 months correlation between Royal and Vista is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Vista Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Gold 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 Vista Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Gold has no effect on the direction of Royal Gold i.e., Royal Gold and Vista Gold go up and down completely randomly.

Pair Corralation between Royal Gold and Vista Gold

Given the investment horizon of 90 days Royal Gold is expected to generate 0.51 times more return on investment than Vista Gold. However, Royal Gold is 1.95 times less risky than Vista Gold. It trades about 0.21 of its potential returns per unit of risk. Vista Gold is currently generating about 0.0 per unit of risk. If you would invest  13,903  in Royal Gold on November 29, 2024 and sell it today you would earn a total of  1,139  from holding Royal Gold or generate 8.19% return on investment over 90 days.

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

Royal Gold  vs.  Vista Gold

Royal Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Royal Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vista Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vista Gold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royal Gold and Vista Gold

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

The idea behind Royal Gold and Vista 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.