Correlation Between Vista Gold and Royal Helium

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

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

Diversification Opportunities for Vista Gold and Royal Helium

0.71

Correlation Coefficient

Vista Gold  Royal Helium

Poor diversification

The 3 months correlation between Vista and Royal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vista Gold and Royal Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Helium and Vista 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 Vista Gold are associated (or correlated) with Royal Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Helium has no effect on the direction of Vista Gold i.e., Vista Gold and Royal Helium go up and down completely randomly.

Pair Corralation between Vista Gold and Royal Helium

Assuming the 90 days trading horizon Vista Gold is expected to generate 106.7 times less return on investment than Royal Helium. But when comparing it to its historical volatility, Vista Gold is 65.99 times less risky than Royal Helium. It trades about 0.14 of its potential returns per unit of risk. Royal Helium is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Royal Helium on December 21, 2024 and sell it today you would lose (1.00) from holding Royal Helium or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Vista Gold  vs.  Royal Helium

Vista Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Gold are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Vista Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Royal Helium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vista Gold and Royal Helium

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

The idea behind Vista Gold and Royal Helium 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.