Correlation Between Thesis Gold and China Gold

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

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

Diversification Opportunities for Thesis Gold and China Gold

-0.52

Correlation Coefficient

Thesis Gold  China Gold

Excellent diversification

The 3 months correlation between Thesis and China is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Thesis Gold and China Gold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gold International and Thesis 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 Thesis Gold are associated (or correlated) with China Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gold International has no effect on the direction of Thesis Gold i.e., Thesis Gold and China Gold go up and down completely randomly.

Pair Corralation between Thesis Gold and China Gold

Assuming the 90 days horizon Thesis Gold is expected to generate 3.02 times more return on investment than China Gold. However, Thesis Gold is 3.02 times more volatile than China Gold International. It trades about 0.02 of its potential returns per unit of risk. China Gold International is currently generating about 0.05 per unit of risk. If you would invest  94.00  in Thesis Gold on October 4, 2024 and sell it today you would lose (37.00) from holding Thesis Gold or give up 39.36% of portfolio value over 90 days.

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

Thesis Gold  vs.  China Gold International

Thesis Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thesis Gold 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

China Gold International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, China Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thesis Gold and China Gold

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

The idea behind Thesis Gold and China Gold International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.