Correlation Between Allied Gold and NeXGold Mining

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

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

Diversification Opportunities for Allied Gold and NeXGold Mining

0.33

Correlation Coefficient

Allied Gold  NeXGold Mining

Weak diversification

The 3 months correlation between Allied and NeXGold is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Allied Gold and NeXGold Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeXGold Mining Corp and Allied 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 Allied Gold are associated (or correlated) with NeXGold Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeXGold Mining Corp has no effect on the direction of Allied Gold i.e., Allied Gold and NeXGold Mining go up and down completely randomly.

Pair Corralation between Allied Gold and NeXGold Mining

Assuming the 90 days trading horizon Allied Gold is expected to generate 1.3 times more return on investment than NeXGold Mining. However, Allied Gold is 1.3 times more volatile than NeXGold Mining Corp. It trades about 0.04 of its potential returns per unit of risk. NeXGold Mining Corp is currently generating about -0.01 per unit of risk. If you would invest  335.00  in Allied Gold on September 16, 2024 and sell it today you would earn a total of  15.00  from holding Allied Gold or generate 4.48% return on investment over 90 days.

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

Allied Gold  vs.  NeXGold Mining Corp

Allied Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Allied Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NeXGold Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Allied Gold and NeXGold Mining

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

The idea behind Allied Gold and NeXGold Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.