Correlation Between Sitka Gold and Fpa Crescent

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

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

Diversification Opportunities for Sitka Gold and Fpa Crescent

0.65

Correlation Coefficient

Sitka Gold  Fpa Crescent

Poor diversification

The 3 months correlation between Sitka and Fpa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sitka Gold Corp and Fpa Crescent Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fpa Crescent and Sitka 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 Sitka Gold Corp are associated (or correlated) with Fpa Crescent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fpa Crescent has no effect on the direction of Sitka Gold i.e., Sitka Gold and Fpa Crescent go up and down completely randomly.

Pair Corralation between Sitka Gold and Fpa Crescent

Assuming the 90 days horizon Sitka Gold Corp is expected to generate 14.38 times more return on investment than Fpa Crescent. However, Sitka Gold is 14.38 times more volatile than Fpa Crescent Fund. It trades about 0.17 of its potential returns per unit of risk. Fpa Crescent Fund is currently generating about 0.16 per unit of risk. If you would invest  17.00  in Sitka Gold Corp on September 3, 2024 and sell it today you would earn a total of  15.00  from holding Sitka Gold Corp or generate 88.24% return on investment over 90 days.

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

Sitka Gold Corp  vs.  Fpa Crescent Fund

Sitka Gold Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sitka Gold Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Sitka Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Fpa Crescent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fpa Crescent Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fpa Crescent is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sitka Gold and Fpa Crescent

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

The idea behind Sitka Gold Corp and Fpa Crescent Fund 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.