Correlation Between Soma Gold and Advance Gold

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

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

Diversification Opportunities for Soma Gold and Advance Gold

-0.15

Correlation Coefficient

Soma Gold  Advance Gold

Good diversification

The 3 months correlation between Soma and Advance is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Soma Gold Corp and Advance Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Gold Corp and Soma 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 Soma Gold Corp are associated (or correlated) with Advance Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Gold Corp has no effect on the direction of Soma Gold i.e., Soma Gold and Advance Gold go up and down completely randomly.

Pair Corralation between Soma Gold and Advance Gold

Assuming the 90 days horizon Soma Gold is expected to generate 81.54 times less return on investment than Advance Gold. But when comparing it to its historical volatility, Soma Gold Corp is 5.45 times less risky than Advance Gold. It trades about 0.01 of its potential returns per unit of risk. Advance Gold Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.69  in Advance Gold Corp on October 10, 2024 and sell it today you would earn a total of  1.51  from holding Advance Gold Corp or generate 218.84% return on investment over 90 days.

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

Soma Gold Corp  vs.  Advance Gold Corp

Soma Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soma Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Advance Gold Corp

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Soma Gold and Advance Gold

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

The idea behind Soma Gold Corp and Advance 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.