Correlation Between Xtra Gold and Loncor Resources

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Can any of the company-specific risk be diversified away by investing in both Xtra Gold and Loncor Resources 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 Xtra Gold and Loncor Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtra Gold Resources Corp and Loncor Resources, you can compare the effects of market volatilities on Xtra Gold and Loncor Resources 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 Xtra Gold with a short position of Loncor Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtra Gold and Loncor Resources.

Diversification Opportunities for Xtra Gold and Loncor Resources

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Xtra and Loncor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Xtra Gold Resources Corp and Loncor Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loncor Resources and Xtra 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 Xtra Gold Resources Corp are associated (or correlated) with Loncor Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loncor Resources has no effect on the direction of Xtra Gold i.e., Xtra Gold and Loncor Resources go up and down completely randomly.

Pair Corralation between Xtra Gold and Loncor Resources

Assuming the 90 days trading horizon Xtra Gold Resources Corp is expected to generate 1.23 times more return on investment than Loncor Resources. However, Xtra Gold is 1.23 times more volatile than Loncor Resources. It trades about 0.27 of its potential returns per unit of risk. Loncor Resources is currently generating about -0.03 per unit of risk. If you would invest  157.00  in Xtra Gold Resources Corp on September 5, 2024 and sell it today you would earn a total of  24.00  from holding Xtra Gold Resources Corp or generate 15.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Xtra Gold Resources Corp  vs.  Loncor Resources

 Performance 
       Timeline  
Xtra Gold Resources 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Xtra Gold Resources Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Xtra Gold displayed solid returns over the last few months and may actually be approaching a breakup point.
Loncor Resources 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Loncor Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Loncor Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Xtra Gold and Loncor Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtra Gold and Loncor Resources

The main advantage of trading using opposite Xtra Gold and Loncor Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtra Gold position performs unexpectedly, Loncor Resources 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 Loncor Resources will offset losses from the drop in Loncor Resources' long position.
The idea behind Xtra Gold Resources Corp and Loncor 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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