Correlation Between Patagonia Gold and Transition Metals

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

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

Diversification Opportunities for Patagonia Gold and Transition Metals

-0.4

Correlation Coefficient

Patagonia Gold  Transition Metals

Very good diversification

The 3 months correlation between Patagonia and Transition is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Patagonia Gold Corp and Transition Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transition Metals Corp and Patagonia 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 Patagonia Gold Corp are associated (or correlated) with Transition Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transition Metals Corp has no effect on the direction of Patagonia Gold i.e., Patagonia Gold and Transition Metals go up and down completely randomly.

Pair Corralation between Patagonia Gold and Transition Metals

Assuming the 90 days trading horizon Patagonia Gold Corp is expected to generate 1.5 times more return on investment than Transition Metals. However, Patagonia Gold is 1.5 times more volatile than Transition Metals Corp. It trades about 0.03 of its potential returns per unit of risk. Transition Metals Corp is currently generating about 0.0 per unit of risk. If you would invest  4.00  in Patagonia Gold Corp on September 23, 2024 and sell it today you would lose (1.00) from holding Patagonia Gold Corp or give up 25.0% of portfolio value over 90 days.

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

Patagonia Gold Corp  vs.  Transition Metals Corp

Patagonia Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

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

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transition Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Transition Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Patagonia Gold and Transition Metals

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

The idea behind Patagonia Gold Corp and Transition Metals Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.