Correlation Between North American and Carlin Gold

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

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

Diversification Opportunities for North American and Carlin Gold

-0.32

Correlation Coefficient

North American  Carlin Gold

Very good diversification

The 3 months correlation between North and Carlin is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Carlin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlin Gold and North American 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 North American Construction are associated (or correlated) with Carlin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlin Gold has no effect on the direction of North American i.e., North American and Carlin Gold go up and down completely randomly.

Pair Corralation between North American and Carlin Gold

Assuming the 90 days trading horizon North American Construction is expected to generate 0.61 times more return on investment than Carlin Gold. However, North American Construction is 1.64 times less risky than Carlin Gold. It trades about 0.07 of its potential returns per unit of risk. Carlin Gold is currently generating about -0.02 per unit of risk. If you would invest  2,581  in North American Construction on September 1, 2024 and sell it today you would earn a total of  277.00  from holding North American Construction or generate 10.73% return on investment over 90 days.

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

North American Construction  vs.  Carlin Gold

North American Const

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Carlin Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlin Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carlin Gold is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with North American and Carlin Gold

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

The idea behind North American Construction and Carlin 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.