Correlation Between Japan Gold and Contact Gold

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

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

Diversification Opportunities for Japan Gold and Contact Gold

0.24

Correlation Coefficient

Japan Gold  Contact Gold

Modest diversification

The 3 months correlation between Japan and Contact is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Japan Gold Corp and Contact Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Gold Corp and Japan Gold 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 Japan Gold Corp are associated (or correlated) with Contact Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Gold Corp has no effect on the direction of Japan Gold i.e., Japan Gold and Contact Gold go up and down completely randomly.

Pair Corralation between Japan Gold and Contact Gold

If you would invest  4.70  in Japan Gold Corp on September 12, 2024 and sell it today you would earn a total of  0.50  from holding Japan Gold Corp or generate 10.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Japan Gold Corp  vs.  Contact Gold Corp

Japan Gold Corp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Contact Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contact Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Contact Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Japan Gold and Contact Gold

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

The idea behind Japan Gold Corp and Contact 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.