Correlation Between Teck Resources and Lode Gold

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

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

Diversification Opportunities for Teck Resources and Lode Gold

0.36

Correlation Coefficient

Teck Resources  Lode Gold

Weak diversification

The 3 months correlation between Teck and Lode is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Limited and Lode Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lode Gold Resources and Teck Resources 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 Teck Resources Limited are associated (or correlated) with Lode Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lode Gold Resources has no effect on the direction of Teck Resources i.e., Teck Resources and Lode Gold go up and down completely randomly.

Pair Corralation between Teck Resources and Lode Gold

Assuming the 90 days trading horizon Teck Resources is expected to generate 15.46 times less return on investment than Lode Gold. But when comparing it to its historical volatility, Teck Resources Limited is 5.68 times less risky than Lode Gold. It trades about 0.02 of its potential returns per unit of risk. Lode Gold Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Lode Gold Resources on October 11, 2024 and sell it today you would lose (26.00) from holding Lode Gold Resources or give up 52.0% of portfolio value over 90 days.

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

Teck Resources Limited  vs.  Lode Gold Resources

Teck Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teck Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lode Gold Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lode Gold Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lode Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teck Resources and Lode Gold

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

The idea behind Teck Resources Limited and Lode Gold Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.