Correlation Between Japan Gold and Fremont Gold

Can any of the company-specific risk be diversified away by investing in both Japan Gold and Fremont 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 Fremont 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 Fremont Gold, you can compare the effects of market volatilities on Japan Gold and Fremont 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 Fremont Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Gold and Fremont Gold.

Diversification Opportunities for Japan Gold and Fremont Gold

0.01

Correlation Coefficient

Japan Gold  Fremont Gold

Significant diversification

The 3 months correlation between Japan and Fremont is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Japan Gold Corp and Fremont Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fremont Gold 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 Fremont Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fremont Gold has no effect on the direction of Japan Gold i.e., Japan Gold and Fremont Gold go up and down completely randomly.

Pair Corralation between Japan Gold and Fremont Gold

Assuming the 90 days horizon Japan Gold is expected to generate 2.52 times less return on investment than Fremont Gold. But when comparing it to its historical volatility, Japan Gold Corp is 1.72 times less risky than Fremont Gold. It trades about 0.02 of its potential returns per unit of risk. Fremont Gold is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9.52  in Fremont Gold on September 5, 2024 and sell it today you would lose (1.88) from holding Fremont Gold or give up 19.75% of portfolio value over 90 days.

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

Japan Gold Corp  vs.  Fremont Gold

Japan Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Japan Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fremont Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fremont Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fremont Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Gold and Fremont Gold

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

The idea behind Japan Gold Corp and Fremont Gold 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.