Correlation Between US Gold and Sitka Gold

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

Diversification Opportunities for US Gold and Sitka Gold

0.08

Correlation Coefficient

US Gold  Sitka Gold

Significant diversification

The 3 months correlation between USAU and Sitka is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Sitka Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitka 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 Sitka Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitka Gold Corp has no effect on the direction of US Gold i.e., US Gold and Sitka Gold go up and down completely randomly.

Pair Corralation between US Gold and Sitka Gold

Given the investment horizon of 90 days US Gold Corp is expected to generate 0.76 times more return on investment than Sitka Gold. However, US Gold Corp is 1.31 times less risky than Sitka Gold. It trades about 0.22 of its potential returns per unit of risk. Sitka Gold Corp is currently generating about 0.03 per unit of risk. If you would invest  597.00  in US Gold Corp on December 5, 2024 and sell it today you would earn a total of  237.00  from holding US Gold Corp or generate 39.7% 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.  Sitka Gold Corp

US Gold Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 4 (%) 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.

Sitka Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitka Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Sitka Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with US Gold and Sitka Gold

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

The idea behind US Gold Corp and Sitka 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.