Correlation Between Xtra Gold and TRX Gold

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

Diversification Opportunities for Xtra Gold and TRX Gold

-0.54

Correlation Coefficient

Xtra Gold  TRX Gold

Excellent diversification

The 3 months correlation between Xtra and TRX is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Xtra Gold Resources Corp and TRX Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRX Gold Corp 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 TRX Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRX Gold Corp has no effect on the direction of Xtra Gold i.e., Xtra Gold and TRX Gold go up and down completely randomly.

Pair Corralation between Xtra Gold and TRX Gold

Assuming the 90 days trading horizon Xtra Gold Resources Corp is expected to generate 1.62 times more return on investment than TRX Gold. However, Xtra Gold is 1.62 times more volatile than TRX Gold Corp. It trades about 0.11 of its potential returns per unit of risk. TRX Gold Corp is currently generating about -0.08 per unit of risk. If you would invest  190.00  in Xtra Gold Resources Corp on December 19, 2024 and sell it today you would earn a total of  24.00  from holding Xtra Gold Resources Corp or generate 12.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Xtra Gold Resources Corp  vs.  TRX Gold Corp

Xtra Gold Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtra Gold Resources Corp are ranked lower than 8 (%) 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.

TRX Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRX Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TRX Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Xtra Gold and TRX Gold

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

The idea behind Xtra Gold Resources Corp and TRX 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.