Correlation Between Southern Empire and Patagonia Gold

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

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

Diversification Opportunities for Southern Empire and Patagonia Gold

-0.53

Correlation Coefficient

Southern Empire  Patagonia Gold

Excellent diversification

The 3 months correlation between Southern and Patagonia is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Southern Empire Resources and Patagonia Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patagonia Gold Corp and Southern Empire 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 Empire Resources are associated (or correlated) with Patagonia Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patagonia Gold Corp has no effect on the direction of Southern Empire i.e., Southern Empire and Patagonia Gold go up and down completely randomly.

Pair Corralation between Southern Empire and Patagonia Gold

Assuming the 90 days horizon Southern Empire Resources is expected to under-perform the Patagonia Gold. But the stock apears to be less risky and, when comparing its historical volatility, Southern Empire Resources is 1.49 times less risky than Patagonia Gold. The stock trades about -0.12 of its potential returns per unit of risk. The Patagonia Gold Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Patagonia Gold Corp on September 1, 2024 and sell it today you would earn a total of  1.00  from holding Patagonia Gold Corp or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Southern Empire Resources  vs.  Patagonia Gold Corp

Southern Empire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Empire Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Patagonia Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patagonia Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Patagonia Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Empire and Patagonia Gold

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

The idea behind Southern Empire Resources and Patagonia 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.