Correlation Between Cerrado Gold and Roscan Gold

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

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

Diversification Opportunities for Cerrado Gold and Roscan Gold

-0.16

Correlation Coefficient

Cerrado Gold  Roscan Gold

Good diversification

The 3 months correlation between Cerrado and Roscan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cerrado Gold and Roscan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roscan Gold Corp and Cerrado 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 Cerrado Gold are associated (or correlated) with Roscan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roscan Gold Corp has no effect on the direction of Cerrado Gold i.e., Cerrado Gold and Roscan Gold go up and down completely randomly.

Pair Corralation between Cerrado Gold and Roscan Gold

Assuming the 90 days horizon Cerrado Gold is expected to generate 0.97 times more return on investment than Roscan Gold. However, Cerrado Gold is 1.04 times less risky than Roscan Gold. It trades about 0.11 of its potential returns per unit of risk. Roscan Gold Corp is currently generating about 0.04 per unit of risk. If you would invest  17.00  in Cerrado Gold on September 4, 2024 and sell it today you would earn a total of  7.00  from holding Cerrado Gold or generate 41.18% return on investment over 90 days.

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

Cerrado Gold  vs.  Roscan Gold Corp

Cerrado Gold

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cerrado Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cerrado Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Roscan Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roscan Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Roscan Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cerrado Gold and Roscan Gold

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

The idea behind Cerrado Gold and Roscan Gold 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.