Correlation Between Vista Gold and Tectonic Metals

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

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

Diversification Opportunities for Vista Gold and Tectonic Metals

0.6

Correlation Coefficient

Vista Gold  Tectonic Metals

Poor diversification

The 3 months correlation between Vista and Tectonic is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vista Gold and Tectonic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tectonic Metals 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 Tectonic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tectonic Metals has no effect on the direction of Vista Gold i.e., Vista Gold and Tectonic Metals go up and down completely randomly.

Pair Corralation between Vista Gold and Tectonic Metals

Assuming the 90 days trading horizon Vista Gold is expected to generate 1.35 times less return on investment than Tectonic Metals. But when comparing it to its historical volatility, Vista Gold is 1.67 times less risky than Tectonic Metals. It trades about 0.14 of its potential returns per unit of risk. Tectonic Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Tectonic Metals on December 21, 2024 and sell it today you would earn a total of  1.75  from holding Tectonic Metals or generate 38.89% return on investment over 90 days.

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

Vista Gold  vs.  Tectonic Metals

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.

Tectonic Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Tectonic Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vista Gold and Tectonic Metals

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

The idea behind Vista Gold and Tectonic Metals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.