Correlation Between Talon Metals and Magnum Goldcorp

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

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

Diversification Opportunities for Talon Metals and Magnum Goldcorp

0.39

Correlation Coefficient

Talon Metals  Magnum Goldcorp

Weak diversification

The 3 months correlation between Talon and Magnum is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Magnum Goldcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Goldcorp and Talon Metals 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 Talon Metals Corp are associated (or correlated) with Magnum Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Goldcorp has no effect on the direction of Talon Metals i.e., Talon Metals and Magnum Goldcorp go up and down completely randomly.

Pair Corralation between Talon Metals and Magnum Goldcorp

Assuming the 90 days trading horizon Talon Metals Corp is expected to generate 0.98 times more return on investment than Magnum Goldcorp. However, Talon Metals Corp is 1.02 times less risky than Magnum Goldcorp. It trades about 0.02 of its potential returns per unit of risk. Magnum Goldcorp is currently generating about -0.12 per unit of risk. If you would invest  9.00  in Talon Metals Corp on December 20, 2024 and sell it today you would lose (0.50) from holding Talon Metals Corp or give up 5.56% of portfolio value over 90 days.

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

Talon Metals Corp  vs.  Magnum Goldcorp

Talon Metals Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talon Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Talon Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Magnum Goldcorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Talon Metals and Magnum Goldcorp

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

The idea behind Talon Metals Corp and Magnum Goldcorp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.