Correlation Between Cariboo Rose and Desert Gold

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

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

Diversification Opportunities for Cariboo Rose and Desert Gold

0.02

Correlation Coefficient

Cariboo Rose  Desert Gold

Significant diversification

The 3 months correlation between Cariboo and Desert is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cariboo Rose Resources and Desert Gold Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desert Gold Ventures and Cariboo Rose 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 Cariboo Rose Resources are associated (or correlated) with Desert Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desert Gold Ventures has no effect on the direction of Cariboo Rose i.e., Cariboo Rose and Desert Gold go up and down completely randomly.

Pair Corralation between Cariboo Rose and Desert Gold

Assuming the 90 days horizon Cariboo Rose Resources is expected to generate 3.09 times more return on investment than Desert Gold. However, Cariboo Rose is 3.09 times more volatile than Desert Gold Ventures. It trades about 0.1 of its potential returns per unit of risk. Desert Gold Ventures is currently generating about -0.04 per unit of risk. If you would invest  3.00  in Cariboo Rose Resources on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Cariboo Rose Resources or generate 33.33% return on investment over 90 days.

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

Cariboo Rose Resources  vs.  Desert Gold Ventures

Cariboo Rose Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cariboo Rose Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Cariboo Rose showed solid returns over the last few months and may actually be approaching a breakup point.

Desert Gold Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Desert Gold Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Cariboo Rose and Desert Gold

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

The idea behind Cariboo Rose Resources and Desert Gold Ventures 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.