Correlation Between Royal Gold and Hycroft Mining

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

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

Diversification Opportunities for Royal Gold and Hycroft Mining

-0.2

Correlation Coefficient

Royal Gold  Hycroft Mining

Good diversification

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

Pair Corralation between Royal Gold and Hycroft Mining

Given the investment horizon of 90 days Royal Gold is expected to generate 9.02 times less return on investment than Hycroft Mining. But when comparing it to its historical volatility, Royal Gold is 10.07 times less risky than Hycroft Mining. It trades about 0.08 of its potential returns per unit of risk. Hycroft Mining Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.60  in Hycroft Mining Holding on September 12, 2024 and sell it today you would lose (1.23) from holding Hycroft Mining Holding or give up 47.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.19%
Values	Daily Returns

Royal Gold  vs.  Hycroft Mining Holding

Royal Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Royal Gold is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Hycroft Mining Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hycroft Mining Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal fundamental indicators, Hycroft Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Royal Gold and Hycroft Mining

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

The idea behind Royal Gold and Hycroft Mining Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .