Correlation Between Torex Gold and Contango ORE

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

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

Diversification Opportunities for Torex Gold and Contango ORE

-0.36

Correlation Coefficient

Torex Gold  Contango ORE

Very good diversification

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

Pair Corralation between Torex Gold and Contango ORE

Assuming the 90 days horizon Torex Gold Resources is expected to generate 0.75 times more return on investment than Contango ORE. However, Torex Gold Resources is 1.34 times less risky than Contango ORE. It trades about 0.2 of its potential returns per unit of risk. Contango ORE is currently generating about 0.02 per unit of risk. If you would invest  1,925  in Torex Gold Resources on December 29, 2024 and sell it today you would earn a total of  757.00  from holding Torex Gold Resources or generate 39.32% return on investment over 90 days.

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

Torex Gold Resources  vs.  Contango ORE

Torex Gold Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Torex Gold Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Torex Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Contango ORE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Contango ORE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Contango ORE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Torex Gold and Contango ORE

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

The idea behind Torex Gold Resources and Contango ORE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.