Correlation Between Gold Terra and Puma Exploration

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

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

Diversification Opportunities for Gold Terra and Puma Exploration

-0.06

Correlation Coefficient

Gold Terra  Puma Exploration

Good diversification

The 3 months correlation between Gold and Puma is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gold Terra Resource and Puma Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Exploration and Gold Terra 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 Gold Terra Resource are associated (or correlated) with Puma Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puma Exploration has no effect on the direction of Gold Terra i.e., Gold Terra and Puma Exploration go up and down completely randomly.

Pair Corralation between Gold Terra and Puma Exploration

Assuming the 90 days horizon Gold Terra Resource is expected to generate 0.9 times more return on investment than Puma Exploration. However, Gold Terra Resource is 1.11 times less risky than Puma Exploration. It trades about 0.04 of its potential returns per unit of risk. Puma Exploration is currently generating about -0.04 per unit of risk. If you would invest  4.11  in Gold Terra Resource on September 22, 2024 and sell it today you would earn a total of  0.04  from holding Gold Terra Resource or generate 0.97% return on investment over 90 days.

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

Gold Terra Resource  vs.  Puma Exploration

Gold Terra Resource

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Terra Resource are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Gold Terra reported solid returns over the last few months and may actually be approaching a breakup point.

Puma Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Puma Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Terra and Puma Exploration

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

The idea behind Gold Terra Resource and Puma Exploration 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.