Correlation Between Outcrop Gold and Fjordland Exploration

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

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

Diversification Opportunities for Outcrop Gold and Fjordland Exploration

0.57

Correlation Coefficient

Outcrop Gold  Fjordland Exploration

Very weak diversification

The 3 months correlation between Outcrop and Fjordland is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Outcrop Gold Corp and Fjordland Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fjordland Exploration and Outcrop 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 Outcrop Gold Corp are associated (or correlated) with Fjordland Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fjordland Exploration has no effect on the direction of Outcrop Gold i.e., Outcrop Gold and Fjordland Exploration go up and down completely randomly.

Pair Corralation between Outcrop Gold and Fjordland Exploration

Assuming the 90 days horizon Outcrop Gold is expected to generate 235.29 times less return on investment than Fjordland Exploration. But when comparing it to its historical volatility, Outcrop Gold Corp is 3.18 times less risky than Fjordland Exploration. It trades about 0.0 of its potential returns per unit of risk. Fjordland Exploration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Fjordland Exploration on September 30, 2024 and sell it today you would lose (1.00) from holding Fjordland Exploration or give up 50.0% of portfolio value over 90 days.

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

Outcrop Gold Corp  vs.  Fjordland Exploration

Outcrop Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outcrop Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Fjordland Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fjordland Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fjordland Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Outcrop Gold and Fjordland Exploration

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

The idea behind Outcrop Gold Corp and Fjordland Exploration 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.