Correlation Between US Gold and Big Ridge

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

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

Diversification Opportunities for US Gold and Big Ridge

0.42

Correlation Coefficient

US Gold  Big Ridge

Very weak diversification

The 3 months correlation between USAU and Big is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Big Ridge Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Ridge Gold and US 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 US Gold Corp are associated (or correlated) with Big Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Ridge Gold has no effect on the direction of US Gold i.e., US Gold and Big Ridge go up and down completely randomly.

Pair Corralation between US Gold and Big Ridge

Given the investment horizon of 90 days US Gold is expected to generate 1.85 times less return on investment than Big Ridge. But when comparing it to its historical volatility, US Gold Corp is 2.61 times less risky than Big Ridge. It trades about 0.11 of its potential returns per unit of risk. Big Ridge Gold is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Big Ridge Gold on September 4, 2024 and sell it today you would earn a total of  3.50  from holding Big Ridge Gold or generate 87.5% return on investment over 90 days.

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

US Gold Corp  vs.  Big Ridge Gold

US Gold Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, US Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Big Ridge Gold

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Big Ridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Gold and Big Ridge

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

The idea behind US Gold Corp and Big Ridge 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.