Correlation Between Triple Flag and New Pacific

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

By analyzing existing cross correlation between Triple Flag Precious and New Pacific Metals, you can compare the effects of market volatilities on Triple Flag and New Pacific 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 Triple Flag with a short position of New Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triple Flag and New Pacific.

Diversification Opportunities for Triple Flag and New Pacific

0.29

Correlation Coefficient

Triple Flag  New Pacific

Modest diversification

The 3 months correlation between Triple and New is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Triple Flag Precious and New Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Pacific Metals and Triple Flag 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 Triple Flag Precious are associated (or correlated) with New Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Pacific Metals has no effect on the direction of Triple Flag i.e., Triple Flag and New Pacific go up and down completely randomly.

Pair Corralation between Triple Flag and New Pacific

Given the investment horizon of 90 days Triple Flag Precious is expected to generate 0.45 times more return on investment than New Pacific. However, Triple Flag Precious is 2.21 times less risky than New Pacific. It trades about 0.27 of its potential returns per unit of risk. New Pacific Metals is currently generating about 0.04 per unit of risk. If you would invest  1,489  in Triple Flag Precious on December 28, 2024 and sell it today you would earn a total of  483.00  from holding Triple Flag Precious or generate 32.44% return on investment over 90 days.

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

Triple Flag Precious  vs.  New Pacific Metals

Triple Flag Precious

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Triple Flag Precious are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Triple Flag displayed solid returns over the last few months and may actually be approaching a breakup point.

New Pacific Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Pacific Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, New Pacific may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Triple Flag and New Pacific

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

The idea behind Triple Flag Precious and New Pacific Metals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.