Correlation Between GoGold Resources and Star Royalties

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

By analyzing existing cross correlation between GoGold Resources and Star Royalties, you can compare the effects of market volatilities on GoGold Resources and Star Royalties 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 Star Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoGold Resources and Star Royalties.

Diversification Opportunities for GoGold Resources and Star Royalties

0.57

Correlation Coefficient

GoGold Resources  Star Royalties

Very weak diversification

The 3 months correlation between GoGold and Star is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GoGold Resources and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Royalties 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 Star Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Royalties has no effect on the direction of GoGold Resources i.e., GoGold Resources and Star Royalties go up and down completely randomly.

Pair Corralation between GoGold Resources and Star Royalties

Assuming the 90 days horizon GoGold Resources is expected to generate 1.19 times less return on investment than Star Royalties. In addition to that, GoGold Resources is 1.13 times more volatile than Star Royalties. It trades about 0.06 of its total potential returns per unit of risk. Star Royalties is currently generating about 0.08 per unit of volatility. If you would invest  19.00  in Star Royalties on September 1, 2024 and sell it today you would earn a total of  3.00  from holding Star Royalties or generate 15.79% return on investment over 90 days.

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

GoGold Resources  vs.  Star Royalties

GoGold Resources

Risk-Adjusted Performance

4 of 100

Modest

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

Star Royalties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Star Royalties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Star Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoGold Resources and Star Royalties

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

The idea behind GoGold Resources and Star Royalties 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 Transaction History module to view history of all your transactions and understand their impact on performance.