Correlation Between Klondike Gold and Marvel Gold

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

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

Diversification Opportunities for Klondike Gold and Marvel Gold

0.71

Correlation Coefficient

Klondike Gold  Marvel Gold

Poor diversification

The 3 months correlation between Klondike and Marvel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Klondike Gold Corp and Marvel Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvel Gold Limited and Klondike 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 Klondike Gold Corp are associated (or correlated) with Marvel Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvel Gold Limited has no effect on the direction of Klondike Gold i.e., Klondike Gold and Marvel Gold go up and down completely randomly.

Pair Corralation between Klondike Gold and Marvel Gold

Assuming the 90 days horizon Klondike Gold Corp is expected to generate 0.85 times more return on investment than Marvel Gold. However, Klondike Gold Corp is 1.18 times less risky than Marvel Gold. It trades about -0.05 of its potential returns per unit of risk. Marvel Gold Limited is currently generating about -0.13 per unit of risk. If you would invest  7.00  in Klondike Gold Corp on September 12, 2024 and sell it today you would lose (2.57) from holding Klondike Gold Corp or give up 36.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Klondike Gold Corp  vs.  Marvel Gold Limited

Klondike Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klondike Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Marvel Gold Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marvel Gold Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Klondike Gold and Marvel Gold

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

The idea behind Klondike Gold Corp and Marvel Gold Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..