Correlation Between Sitka Gold and Small Cap

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

Diversification Opportunities for Sitka Gold and Small Cap

0.24

Correlation Coefficient

Sitka Gold  Small Cap

Modest diversification

The 3 months correlation between Sitka and Small is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sitka Gold Corp and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Sitka Gold i.e., Sitka Gold and Small Cap go up and down completely randomly.

Pair Corralation between Sitka Gold and Small Cap

Assuming the 90 days horizon Sitka Gold Corp is expected to under-perform the Small Cap. In addition to that, Sitka Gold is 1.05 times more volatile than Small Cap Core. It trades about -0.41 of its total potential returns per unit of risk. Small Cap Core is currently generating about -0.37 per unit of volatility. If you would invest  1,496  in Small Cap Core on September 30, 2024 and sell it today you would lose (291.00) from holding Small Cap Core or give up 19.45% of portfolio value over 90 days.

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

Sitka Gold Corp  vs.  Small Cap Core

Sitka Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sitka Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Sitka Gold and Small Cap

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

The idea behind Sitka Gold Corp and Small Cap Core 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.