Correlation Between Steppe Gold and Cabral Gold

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

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

Diversification Opportunities for Steppe Gold and Cabral Gold

0.78

Correlation Coefficient

Steppe Gold  Cabral Gold

Poor diversification

The 3 months correlation between Steppe and Cabral is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Steppe Gold and Cabral Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabral Gold and Steppe 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 Steppe Gold are associated (or correlated) with Cabral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabral Gold has no effect on the direction of Steppe Gold i.e., Steppe Gold and Cabral Gold go up and down completely randomly.

Pair Corralation between Steppe Gold and Cabral Gold

Assuming the 90 days horizon Steppe Gold is expected to generate 2.71 times less return on investment than Cabral Gold. But when comparing it to its historical volatility, Steppe Gold is 1.67 times less risky than Cabral Gold. It trades about 0.09 of its potential returns per unit of risk. Cabral Gold is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Cabral Gold on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Cabral Gold or generate 60.0% return on investment over 90 days.

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

Steppe Gold  vs.  Cabral Gold

Steppe Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steppe Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Steppe Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Cabral Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cabral Gold are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cabral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steppe Gold and Cabral Gold

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

The idea behind Steppe Gold and Cabral Gold 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.