Correlation Between Gold Fields and Freeman Gold

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

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

Diversification Opportunities for Gold Fields and Freeman Gold

0.66

Correlation Coefficient

Gold Fields  Freeman Gold

Poor diversification

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

Pair Corralation between Gold Fields and Freeman Gold

Considering the 90-day investment horizon Gold Fields is expected to generate 3.98 times less return on investment than Freeman Gold. But when comparing it to its historical volatility, Gold Fields Ltd is 2.81 times less risky than Freeman Gold. It trades about 0.05 of its potential returns per unit of risk. Freeman Gold Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Freeman Gold Corp on September 3, 2024 and sell it today you would earn a total of  1.10  from holding Freeman Gold Corp or generate 18.33% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Freeman Gold Corp

Gold Fields

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Freeman Gold Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freeman Gold Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Freeman Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and Freeman Gold

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

The idea behind Gold Fields Ltd and Freeman 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.