Correlation Between Goldgroup Mining and Prospector Metals

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

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

Diversification Opportunities for Goldgroup Mining and Prospector Metals

-0.2

Correlation Coefficient

Goldgroup Mining  Prospector Metals

Good diversification

The 3 months correlation between Goldgroup and Prospector is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Goldgroup Mining and Prospector Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospector Metals Corp and Goldgroup Mining 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 Goldgroup Mining are associated (or correlated) with Prospector Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospector Metals Corp has no effect on the direction of Goldgroup Mining i.e., Goldgroup Mining and Prospector Metals go up and down completely randomly.

Pair Corralation between Goldgroup Mining and Prospector Metals

Assuming the 90 days horizon Goldgroup Mining is expected to generate 1.28 times less return on investment than Prospector Metals. But when comparing it to its historical volatility, Goldgroup Mining is 1.3 times less risky than Prospector Metals. It trades about 0.05 of its potential returns per unit of risk. Prospector Metals Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Prospector Metals Corp on September 5, 2024 and sell it today you would lose (1.00) from holding Prospector Metals Corp or give up 11.11% of portfolio value over 90 days.

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

Goldgroup Mining  vs.  Prospector Metals Corp

Goldgroup Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldgroup Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Goldgroup Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Prospector Metals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prospector Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prospector Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldgroup Mining and Prospector Metals

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

The idea behind Goldgroup Mining and Prospector Metals 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.