Correlation Between Newmont and Barrick Gold

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

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

Diversification Opportunities for Newmont and Barrick Gold

0.89

Correlation Coefficient

Newmont  Barrick Gold

Very poor diversification

The 3 months correlation between Newmont and Barrick is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Newmont and Barrick Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold and Newmont 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 Newmont are associated (or correlated) with Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold has no effect on the direction of Newmont i.e., Newmont and Barrick Gold go up and down completely randomly.

Pair Corralation between Newmont and Barrick Gold

Assuming the 90 days horizon Newmont is expected to under-perform the Barrick Gold. In addition to that, Newmont is 1.44 times more volatile than Barrick Gold. It trades about -0.07 of its total potential returns per unit of risk. Barrick Gold is currently generating about -0.04 per unit of volatility. If you would invest  1,765  in Barrick Gold on September 3, 2024 and sell it today you would lose (105.00) from holding Barrick Gold or give up 5.95% of portfolio value over 90 days.

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

Newmont  vs.  Barrick Gold

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont 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.

Barrick Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrick Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Barrick 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 Newmont and Barrick Gold

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

The idea behind Newmont and Barrick 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.