Correlation Between US Gold and Newcore Gold

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

Diversification Opportunities for US Gold and Newcore Gold

0.88

Correlation Coefficient

US Gold  Newcore Gold

Very poor diversification

The 3 months correlation between USAU and Newcore is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Newcore Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcore 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 Newcore Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcore Gold has no effect on the direction of US Gold i.e., US Gold and Newcore Gold go up and down completely randomly.

Pair Corralation between US Gold and Newcore Gold

Given the investment horizon of 90 days US Gold is expected to generate 1.49 times less return on investment than Newcore Gold. But when comparing it to its historical volatility, US Gold Corp is 1.03 times less risky than Newcore Gold. It trades about 0.18 of its potential returns per unit of risk. Newcore Gold is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Newcore Gold on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Newcore Gold or generate 90.48% return on investment over 90 days.

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

US Gold Corp  vs.  Newcore Gold

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.

Newcore Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newcore Gold are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newcore Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Gold and Newcore Gold

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

The idea behind US Gold Corp and Newcore 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.