Correlation Between Precipitate Gold and Norsemont Mining

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

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

Diversification Opportunities for Precipitate Gold and Norsemont Mining

-0.53

Correlation Coefficient

Precipitate Gold  Norsemont Mining

Excellent diversification

The 3 months correlation between Precipitate and Norsemont is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Precipitate Gold Corp and Norsemont Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsemont Mining and Precipitate 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 Precipitate Gold Corp are associated (or correlated) with Norsemont Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsemont Mining has no effect on the direction of Precipitate Gold i.e., Precipitate Gold and Norsemont Mining go up and down completely randomly.

Pair Corralation between Precipitate Gold and Norsemont Mining

Assuming the 90 days horizon Precipitate Gold is expected to generate 5.45 times less return on investment than Norsemont Mining. But when comparing it to its historical volatility, Precipitate Gold Corp is 1.34 times less risky than Norsemont Mining. It trades about 0.05 of its potential returns per unit of risk. Norsemont Mining is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Norsemont Mining on September 4, 2024 and sell it today you would earn a total of  11.00  from holding Norsemont Mining or generate 157.14% return on investment over 90 days.

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

Precipitate Gold Corp  vs.  Norsemont Mining

Precipitate Gold Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Precipitate Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Precipitate Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Norsemont Mining

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norsemont Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norsemont Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precipitate Gold and Norsemont Mining

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

The idea behind Precipitate Gold Corp and Norsemont Mining 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.