Correlation Between Southern Arc and Clarity Gold

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

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

Diversification Opportunities for Southern Arc and Clarity Gold

-0.21

Correlation Coefficient

Southern Arc  Clarity Gold

Very good diversification

The 3 months correlation between Southern and Clarity is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Southern Arc Minerals and Clarity Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarity Gold Corp and Southern Arc 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 Southern Arc Minerals are associated (or correlated) with Clarity Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarity Gold Corp has no effect on the direction of Southern Arc i.e., Southern Arc and Clarity Gold go up and down completely randomly.

Pair Corralation between Southern Arc and Clarity Gold

Assuming the 90 days horizon Southern Arc Minerals is expected to under-perform the Clarity Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Southern Arc Minerals is 31.87 times less risky than Clarity Gold. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Clarity Gold Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Clarity Gold Corp on December 30, 2024 and sell it today you would earn a total of  0.90  from holding Clarity Gold Corp or generate 56.25% return on investment over 90 days.

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

Southern Arc Minerals  vs.  Clarity Gold Corp

Southern Arc Minerals

Risk-Adjusted Performance

Very Weak

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

Clarity Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clarity Gold Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Clarity Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Arc and Clarity Gold

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

The idea behind Southern Arc Minerals and Clarity Gold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.