Correlation Between Sitka Gold and Red Oak

Can any of the company-specific risk be diversified away by investing in both Sitka Gold and Red Oak 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 Red Oak 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 Red Oak Technology, you can compare the effects of market volatilities on Sitka Gold and Red Oak 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 Red Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitka Gold and Red Oak.

Diversification Opportunities for Sitka Gold and Red Oak

-0.08

Correlation Coefficient

Sitka Gold  Red Oak

Good diversification

The 3 months correlation between Sitka and Red is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sitka Gold Corp and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology 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 Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of Sitka Gold i.e., Sitka Gold and Red Oak go up and down completely randomly.

Pair Corralation between Sitka Gold and Red Oak

Assuming the 90 days horizon Sitka Gold Corp is expected to generate 5.23 times more return on investment than Red Oak. However, Sitka Gold is 5.23 times more volatile than Red Oak Technology. It trades about 0.07 of its potential returns per unit of risk. Red Oak Technology is currently generating about 0.08 per unit of risk. If you would invest  11.00  in Sitka Gold Corp on October 5, 2024 and sell it today you would earn a total of  15.00  from holding Sitka Gold Corp or generate 136.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Sitka Gold Corp  vs.  Red Oak Technology

Sitka Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Red Oak Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Oak Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Red Oak 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 Red Oak

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

The idea behind Sitka Gold Corp and Red Oak Technology 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.