Correlation Between Roots Corp and Centerra Gold

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

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

Diversification Opportunities for Roots Corp and Centerra Gold

0.53

Correlation Coefficient

Roots Corp  Centerra Gold

Very weak diversification

The 3 months correlation between Roots and Centerra is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Roots Corp and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold and Roots Corp 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 Roots Corp are associated (or correlated) with Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Roots Corp i.e., Roots Corp and Centerra Gold go up and down completely randomly.

Pair Corralation between Roots Corp and Centerra Gold

Assuming the 90 days trading horizon Roots Corp is expected to generate 1.58 times less return on investment than Centerra Gold. But when comparing it to its historical volatility, Roots Corp is 1.07 times less risky than Centerra Gold. It trades about 0.07 of its potential returns per unit of risk. Centerra Gold is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Centerra Gold on December 30, 2024 and sell it today you would earn a total of  118.00  from holding Centerra Gold or generate 14.92% return on investment over 90 days.

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

Roots Corp  vs.  Centerra Gold

Roots Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roots Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Roots Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Centerra Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roots Corp and Centerra Gold

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

The idea behind Roots Corp and Centerra 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.