Correlation Between China Gold and Strikepoint Gold

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

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

Diversification Opportunities for China Gold and Strikepoint Gold

-0.29

Correlation Coefficient

China Gold  Strikepoint Gold

Very good diversification

The 3 months correlation between China and Strikepoint is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Gold International and Strikepoint Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strikepoint Gold and China 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 China Gold International are associated (or correlated) with Strikepoint Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strikepoint Gold has no effect on the direction of China Gold i.e., China Gold and Strikepoint Gold go up and down completely randomly.

Pair Corralation between China Gold and Strikepoint Gold

Assuming the 90 days trading horizon China Gold is expected to generate 1.28 times less return on investment than Strikepoint Gold. But when comparing it to its historical volatility, China Gold International is 3.47 times less risky than Strikepoint Gold. It trades about 0.07 of its potential returns per unit of risk. Strikepoint Gold is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Strikepoint Gold on September 22, 2024 and sell it today you would lose (7.00) from holding Strikepoint Gold or give up 28.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

China Gold International  vs.  Strikepoint Gold

China Gold International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, China Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Strikepoint Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strikepoint Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Strikepoint Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Gold and Strikepoint Gold

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

The idea behind China Gold International and Strikepoint 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..