Correlation Between Gold Fields and Aura Minerals

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

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

Diversification Opportunities for Gold Fields and Aura Minerals

0.66

Correlation Coefficient

Gold Fields  Aura Minerals

Poor diversification

The 3 months correlation between Gold and Aura is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Limited and Aura Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Minerals and Gold Fields 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 Gold Fields Limited are associated (or correlated) with Aura Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Minerals has no effect on the direction of Gold Fields i.e., Gold Fields and Aura Minerals go up and down completely randomly.

Pair Corralation between Gold Fields and Aura Minerals

Assuming the 90 days trading horizon Gold Fields is expected to generate 2.4 times less return on investment than Aura Minerals. In addition to that, Gold Fields is 1.03 times more volatile than Aura Minerals. It trades about 0.07 of its total potential returns per unit of risk. Aura Minerals is currently generating about 0.16 per unit of volatility. If you would invest  1,820  in Aura Minerals on August 30, 2024 and sell it today you would earn a total of  526.00  from holding Aura Minerals or generate 28.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Gold Fields Limited  vs.  Aura Minerals

Gold Fields Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Aura Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aura Minerals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and Aura Minerals

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

The idea behind Gold Fields Limited and Aura Minerals 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.