Correlation Between US Gold and Fortitude Gold

Can any of the company-specific risk be diversified away by investing in both US Gold and Fortitude 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 US Gold and Fortitude Gold 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 Fortitude Gold Corp, you can compare the effects of market volatilities on US Gold and Fortitude 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 US Gold with a short position of Fortitude Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Gold and Fortitude Gold.

Diversification Opportunities for US Gold and Fortitude Gold

0.1

Correlation Coefficient

US Gold  Fortitude Gold

Average diversification

The 3 months correlation between USAU and Fortitude is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Fortitude Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortitude Gold Corp 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 Fortitude Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortitude Gold Corp has no effect on the direction of US Gold i.e., US Gold and Fortitude Gold go up and down completely randomly.

Pair Corralation between US Gold and Fortitude Gold

Given the investment horizon of 90 days US Gold Corp is expected to generate 2.16 times more return on investment than Fortitude Gold. However, US Gold is 2.16 times more volatile than Fortitude Gold Corp. It trades about 0.18 of its potential returns per unit of risk. Fortitude Gold Corp is currently generating about 0.01 per unit of risk. If you would invest  633.00  in US Gold Corp on December 28, 2024 and sell it today you would earn a total of  327.00  from holding US Gold Corp or generate 51.66% return on investment over 90 days.

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

US Gold Corp  vs.  Fortitude Gold Corp

US Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 14 (%) 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.

Fortitude Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortitude Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Fortitude Gold is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with US Gold and Fortitude Gold

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

The idea behind US Gold Corp and Fortitude Gold Corp 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.