Correlation Between Outcrop Gold and Freegold Ventures

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

Diversification Opportunities for Outcrop Gold and Freegold Ventures

0.79

Correlation Coefficient

Outcrop Gold  Freegold Ventures

Poor diversification

The 3 months correlation between Outcrop and Freegold is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Outcrop Gold Corp and Freegold Ventures Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freegold Ventures 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 Freegold Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freegold Ventures has no effect on the direction of Outcrop Gold i.e., Outcrop Gold and Freegold Ventures go up and down completely randomly.

Pair Corralation between Outcrop Gold and Freegold Ventures

Assuming the 90 days horizon Outcrop Gold Corp is expected to generate 1.38 times more return on investment than Freegold Ventures. However, Outcrop Gold is 1.38 times more volatile than Freegold Ventures Limited. It trades about -0.1 of its potential returns per unit of risk. Freegold Ventures Limited is currently generating about -0.25 per unit of risk. If you would invest  28.00  in Outcrop Gold Corp on September 26, 2024 and sell it today you would lose (9.00) from holding Outcrop Gold Corp or give up 32.14% of portfolio value over 90 days.

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

Outcrop Gold Corp  vs.  Freegold Ventures Limited

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.

Freegold Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freegold Ventures Limited 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 essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Outcrop Gold and Freegold Ventures

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

The idea behind Outcrop Gold Corp and Freegold Ventures 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.