Correlation Between Volcanic Gold and Q Gold

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

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

Diversification Opportunities for Volcanic Gold and Q Gold

0.22

Correlation Coefficient

Volcanic Gold  Q Gold

Modest diversification

The 3 months correlation between Volcanic and QGR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Volcanic Gold Mines and Q Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q Gold Resources and Volcanic 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 Volcanic Gold Mines are associated (or correlated) with Q Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q Gold Resources has no effect on the direction of Volcanic Gold i.e., Volcanic Gold and Q Gold go up and down completely randomly.

Pair Corralation between Volcanic Gold and Q Gold

Given the investment horizon of 90 days Volcanic Gold Mines is expected to generate 1.69 times more return on investment than Q Gold. However, Volcanic Gold is 1.69 times more volatile than Q Gold Resources. It trades about 0.23 of its potential returns per unit of risk. Q Gold Resources is currently generating about 0.08 per unit of risk. If you would invest  5.00  in Volcanic Gold Mines on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Volcanic Gold Mines or generate 60.0% return on investment over 90 days.

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

Volcanic Gold Mines  vs.  Q Gold Resources

Volcanic Gold Mines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Volcanic Gold Mines are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Volcanic Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Q Gold Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Q Gold Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Q Gold is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Volcanic Gold and Q Gold

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

The idea behind Volcanic Gold Mines and Q Gold Resources 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.