Correlation Between Steppe Gold and Leviathan Gold

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

Diversification Opportunities for Steppe Gold and Leviathan Gold

-0.03

Correlation Coefficient

Steppe Gold  Leviathan Gold

Good diversification

The 3 months correlation between Steppe and Leviathan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Steppe Gold and Leviathan Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leviathan 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 Leviathan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leviathan Gold has no effect on the direction of Steppe Gold i.e., Steppe Gold and Leviathan Gold go up and down completely randomly.

Pair Corralation between Steppe Gold and Leviathan Gold

Assuming the 90 days horizon Steppe Gold is expected to under-perform the Leviathan Gold. But the otc stock apears to be less risky and, when comparing its historical volatility, Steppe Gold is 2.7 times less risky than Leviathan Gold. The otc stock trades about -0.01 of its potential returns per unit of risk. The Leviathan Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.03  in Leviathan Gold on September 13, 2024 and sell it today you would lose (0.24) from holding Leviathan Gold or give up 4.77% of portfolio value over 90 days.

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

Steppe Gold  vs.  Leviathan Gold

Steppe Gold

Risk-Adjusted Performance

0 of 100

Weak

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

Leviathan Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Leviathan Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Leviathan Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steppe Gold and Leviathan Gold

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

The idea behind Steppe Gold and Leviathan 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.