Correlation Between GoGold Resources and Arras Minerals

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

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

Diversification Opportunities for GoGold Resources and Arras Minerals

-0.33

Correlation Coefficient

GoGold Resources  Arras Minerals

Very good diversification

The 3 months correlation between GoGold and Arras is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding GoGold Resources and Arras Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arras Minerals Corp and GoGold Resources 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 GoGold Resources are associated (or correlated) with Arras Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arras Minerals Corp has no effect on the direction of GoGold Resources i.e., GoGold Resources and Arras Minerals go up and down completely randomly.

Pair Corralation between GoGold Resources and Arras Minerals

Assuming the 90 days horizon GoGold Resources is expected to generate 0.75 times more return on investment than Arras Minerals. However, GoGold Resources is 1.34 times less risky than Arras Minerals. It trades about 0.02 of its potential returns per unit of risk. Arras Minerals Corp is currently generating about -0.02 per unit of risk. If you would invest  86.00  in GoGold Resources on September 12, 2024 and sell it today you would lose (1.00) from holding GoGold Resources or give up 1.16% of portfolio value over 90 days.

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

GoGold Resources  vs.  Arras Minerals Corp

GoGold Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoGold Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, GoGold Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arras Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arras Minerals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GoGold Resources and Arras Minerals

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

The idea behind GoGold Resources and Arras Minerals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.