Correlation Between Alamos Gold and Dundee Precious

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

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

Diversification Opportunities for Alamos Gold and Dundee Precious

0.86

Correlation Coefficient

Alamos Gold  Dundee Precious

Very poor diversification

The 3 months correlation between Alamos and Dundee is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alamos Gold and Dundee Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dundee Precious Metals and Alamos 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 Alamos Gold are associated (or correlated) with Dundee Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dundee Precious Metals has no effect on the direction of Alamos Gold i.e., Alamos Gold and Dundee Precious go up and down completely randomly.

Pair Corralation between Alamos Gold and Dundee Precious

Assuming the 90 days trading horizon Alamos Gold is expected to generate 1.01 times less return on investment than Dundee Precious. But when comparing it to its historical volatility, Alamos Gold is 1.1 times less risky than Dundee Precious. It trades about 0.09 of its potential returns per unit of risk. Dundee Precious Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  627.00  in Dundee Precious Metals on September 7, 2024 and sell it today you would earn a total of  691.00  from holding Dundee Precious Metals or generate 110.21% return on investment over 90 days.

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

Alamos Gold  vs.  Dundee Precious Metals

Alamos Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Alamos Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dundee Precious Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Precious Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Dundee Precious is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alamos Gold and Dundee Precious

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

The idea behind Alamos Gold and Dundee Precious Metals 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 Transaction History module to view history of all your transactions and understand their impact on performance.