Correlation Between Rover Metals and Dacian Gold

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

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

Diversification Opportunities for Rover Metals and Dacian Gold

-0.38

Correlation Coefficient

Rover Metals  Dacian Gold

Very good diversification

The 3 months correlation between Rover and Dacian is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rover Metals Corp and Dacian Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dacian Gold Limited and Rover Metals 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 Rover Metals Corp are associated (or correlated) with Dacian Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dacian Gold Limited has no effect on the direction of Rover Metals i.e., Rover Metals and Dacian Gold go up and down completely randomly.

Pair Corralation between Rover Metals and Dacian Gold

Assuming the 90 days horizon Rover Metals Corp is expected to generate 4.73 times more return on investment than Dacian Gold. However, Rover Metals is 4.73 times more volatile than Dacian Gold Limited. It trades about 0.03 of its potential returns per unit of risk. Dacian Gold Limited is currently generating about 0.06 per unit of risk. If you would invest  6.25  in Rover Metals Corp on October 4, 2024 and sell it today you would lose (5.03) from holding Rover Metals Corp or give up 80.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.36%
Values	Daily Returns

Rover Metals Corp  vs.  Dacian Gold Limited

Rover Metals Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rover Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Rover Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Dacian Gold Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dacian Gold Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dacian Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rover Metals and Dacian Gold

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

The idea behind Rover Metals Corp and Dacian Gold Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.