Correlation Between Tanzanian Royalty and New Gold

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

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

Diversification Opportunities for Tanzanian Royalty and New Gold

0.55

Correlation Coefficient

Tanzanian Royalty  New Gold

Very weak diversification

The 3 months correlation between Tanzanian and New is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tanzanian Royalty Exploration and New Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Gold and Tanzanian Royalty 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 Tanzanian Royalty Exploration are associated (or correlated) with New Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Gold has no effect on the direction of Tanzanian Royalty i.e., Tanzanian Royalty and New Gold go up and down completely randomly.

Pair Corralation between Tanzanian Royalty and New Gold

Considering the 90-day investment horizon Tanzanian Royalty Exploration is expected to under-perform the New Gold. But the stock apears to be less risky and, when comparing its historical volatility, Tanzanian Royalty Exploration is 1.33 times less risky than New Gold. The stock trades about -0.02 of its potential returns per unit of risk. The New Gold is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  234.00  in New Gold on September 3, 2024 and sell it today you would earn a total of  41.00  from holding New Gold or generate 17.52% return on investment over 90 days.

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

Tanzanian Royalty Exploration  vs.  New Gold

Tanzanian Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanzanian Royalty Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tanzanian Royalty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

New Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, New Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tanzanian Royalty and New Gold

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

The idea behind Tanzanian Royalty Exploration and New Gold 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.