Correlation Between Dakota Gold and Centerra Gold

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

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

Diversification Opportunities for Dakota Gold and Centerra Gold

0.64

Correlation Coefficient

Dakota Gold  Centerra Gold

Poor diversification

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

Pair Corralation between Dakota Gold and Centerra Gold

Allowing for the 90-day total investment horizon Dakota Gold Corp is expected to under-perform the Centerra Gold. In addition to that, Dakota Gold is 1.38 times more volatile than Centerra Gold. It trades about -0.38 of its total potential returns per unit of risk. Centerra Gold is currently generating about -0.1 per unit of volatility. If you would invest  716.00  in Centerra Gold on March 28, 2024 and sell it today you would lose (37.00) from holding Centerra Gold or give up 5.17% of portfolio value over 90 days.

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

Dakota Gold Corp  vs.  Centerra Gold

Dakota Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dakota Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Dakota Gold may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Centerra Gold

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Centerra Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dakota Gold and Centerra Gold

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

The idea behind Dakota Gold Corp and Centerra Gold 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.