Correlation Between Liberty Gold and First Mining

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

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

Diversification Opportunities for Liberty Gold and First Mining

0.39

Correlation Coefficient

Liberty Gold  First Mining

Weak diversification

The 3 months correlation between Liberty and First is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Gold Corp and First Mining Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mining Gold and Liberty 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 Liberty Gold Corp are associated (or correlated) with First Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mining Gold has no effect on the direction of Liberty Gold i.e., Liberty Gold and First Mining go up and down completely randomly.

Pair Corralation between Liberty Gold and First Mining

Assuming the 90 days horizon Liberty Gold Corp is expected to under-perform the First Mining. But the otc stock apears to be less risky and, when comparing its historical volatility, Liberty Gold Corp is 1.1 times less risky than First Mining. The otc stock trades about -0.13 of its potential returns per unit of risk. The First Mining Gold is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9.80  in First Mining Gold on September 4, 2024 and sell it today you would lose (0.65) from holding First Mining Gold or give up 6.63% of portfolio value over 90 days.

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

Liberty Gold Corp  vs.  First Mining Gold

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty 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 basic 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.

First Mining Gold

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Liberty Gold and First Mining

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

The idea behind Liberty Gold Corp and First Mining 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.