Correlation Between Banyan Gold and TomaGold

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

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

Diversification Opportunities for Banyan Gold and TomaGold

0.19

Correlation Coefficient

Banyan Gold  TomaGold

Average diversification

The 3 months correlation between Banyan and TomaGold is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Banyan Gold Corp and TomaGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TomaGold and Banyan 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 Banyan Gold Corp are associated (or correlated) with TomaGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TomaGold has no effect on the direction of Banyan Gold i.e., Banyan Gold and TomaGold go up and down completely randomly.

Pair Corralation between Banyan Gold and TomaGold

Assuming the 90 days horizon Banyan Gold is expected to generate 4.32 times less return on investment than TomaGold. But when comparing it to its historical volatility, Banyan Gold Corp is 3.15 times less risky than TomaGold. It trades about 0.09 of its potential returns per unit of risk. TomaGold is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.61  in TomaGold on September 5, 2024 and sell it today you would earn a total of  0.46  from holding TomaGold or generate 75.41% return on investment over 90 days.

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

Banyan Gold Corp  vs.  TomaGold

Banyan Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banyan Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Banyan Gold reported solid returns over the last few months and may actually be approaching a breakup point.

TomaGold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TomaGold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, TomaGold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banyan Gold and TomaGold

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

The idea behind Banyan Gold Corp and TomaGold 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.