Correlation Between Radius Gold and Volcanic Gold

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

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

Diversification Opportunities for Radius Gold and Volcanic Gold

0.2

Correlation Coefficient

Radius Gold  Volcanic Gold

Modest diversification

The 3 months correlation between Radius and Volcanic is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Radius Gold and Volcanic Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volcanic Gold Mines and Radius 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 Radius Gold are associated (or correlated) with Volcanic Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volcanic Gold Mines has no effect on the direction of Radius Gold i.e., Radius Gold and Volcanic Gold go up and down completely randomly.

Pair Corralation between Radius Gold and Volcanic Gold

Assuming the 90 days horizon Radius Gold is expected to generate 2.13 times less return on investment than Volcanic Gold. But when comparing it to its historical volatility, Radius Gold is 2.07 times less risky than Volcanic Gold. It trades about 0.08 of its potential returns per unit of risk. Volcanic Gold Mines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5.37  in Volcanic Gold Mines on September 22, 2024 and sell it today you would earn a total of  0.63  from holding Volcanic Gold Mines or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Radius Gold  vs.  Volcanic Gold Mines

Radius Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Radius Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Radius Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Volcanic Gold Mines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Volcanic Gold Mines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Volcanic Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Radius Gold and Volcanic Gold

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

The idea behind Radius Gold and Volcanic Gold Mines 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.