Correlation Between Cerrado Gold and Rupert Resources

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

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

Diversification Opportunities for Cerrado Gold and Rupert Resources

0.44

Correlation Coefficient

Cerrado Gold  Rupert Resources

Very weak diversification

The 3 months correlation between Cerrado and Rupert is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cerrado Gold and Rupert Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rupert Resources 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 Rupert Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rupert Resources has no effect on the direction of Cerrado Gold i.e., Cerrado Gold and Rupert Resources go up and down completely randomly.

Pair Corralation between Cerrado Gold and Rupert Resources

Assuming the 90 days horizon Cerrado Gold is expected to generate 3.41 times more return on investment than Rupert Resources. However, Cerrado Gold is 3.41 times more volatile than Rupert Resources. It trades about 0.13 of its potential returns per unit of risk. Rupert Resources is currently generating about 0.01 per unit of risk. If you would invest  16.00  in Cerrado Gold on September 15, 2024 and sell it today you would earn a total of  9.00  from holding Cerrado Gold or generate 56.25% return on investment over 90 days.

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

Cerrado Gold  vs.  Rupert Resources

Cerrado Gold

Risk-Adjusted Performance

10 of 100

OK

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

Rupert Resources

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Rupert Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rupert Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cerrado Gold and Rupert Resources

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

The idea behind Cerrado Gold and Rupert Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.