Correlation Between Contango ORE and Japan Gold

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

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

Diversification Opportunities for Contango ORE and Japan Gold

0.08

Correlation Coefficient

Contango ORE  Japan Gold

Significant diversification

The 3 months correlation between Contango and Japan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Japan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Gold Corp and Contango ORE 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 Contango ORE are associated (or correlated) with Japan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Gold Corp has no effect on the direction of Contango ORE i.e., Contango ORE and Japan Gold go up and down completely randomly.

Pair Corralation between Contango ORE and Japan Gold

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Japan Gold. But the stock apears to be less risky and, when comparing its historical volatility, Contango ORE is 1.57 times less risky than Japan Gold. The stock trades about -0.11 of its potential returns per unit of risk. The Japan Gold Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.10  in Japan Gold Corp on September 3, 2024 and sell it today you would earn a total of  0.30  from holding Japan Gold Corp or generate 5.88% return on investment over 90 days.

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

Contango ORE  vs.  Japan Gold Corp

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Japan Gold Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Japan Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Contango ORE and Japan Gold

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

The idea behind Contango ORE and Japan 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.