Correlation Between Dynacor Gold and Foraco International

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

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

Diversification Opportunities for Dynacor Gold and Foraco International

0.32

Correlation Coefficient

Dynacor Gold  Foraco International

Weak diversification

The 3 months correlation between Dynacor and Foraco is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dynacor Gold Mines and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International and Dynacor 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 Dynacor Gold Mines are associated (or correlated) with Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Dynacor Gold i.e., Dynacor Gold and Foraco International go up and down completely randomly.

Pair Corralation between Dynacor Gold and Foraco International

Assuming the 90 days trading horizon Dynacor Gold Mines is expected to under-perform the Foraco International. But the stock apears to be less risky and, when comparing its historical volatility, Dynacor Gold Mines is 1.53 times less risky than Foraco International. The stock trades about -0.04 of its potential returns per unit of risk. The Foraco International SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Foraco International SA on September 24, 2024 and sell it today you would earn a total of  10.00  from holding Foraco International SA or generate 4.59% return on investment over 90 days.

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

Dynacor Gold Mines  vs.  Foraco International SA

Dynacor Gold Mines

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dynacor Gold Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Dynacor Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Foraco International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Foraco International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dynacor Gold and Foraco International

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

The idea behind Dynacor Gold Mines and Foraco International SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.