Correlation Between TomaGold and Labrador Gold

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

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

Diversification Opportunities for TomaGold and Labrador Gold

0.09

Correlation Coefficient

TomaGold  Labrador Gold

Significant diversification

The 3 months correlation between TomaGold and Labrador is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding TomaGold and Labrador Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Gold Corp and TomaGold 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 TomaGold are associated (or correlated) with Labrador Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Gold Corp has no effect on the direction of TomaGold i.e., TomaGold and Labrador Gold go up and down completely randomly.

Pair Corralation between TomaGold and Labrador Gold

Assuming the 90 days horizon TomaGold is expected to generate 1.92 times more return on investment than Labrador Gold. However, TomaGold is 1.92 times more volatile than Labrador Gold Corp. It trades about 0.13 of its potential returns per unit of risk. Labrador Gold Corp is currently generating about -0.04 per unit of risk. If you would invest  0.61  in TomaGold on September 5, 2024 and sell it today you would earn a total of  0.46  from holding TomaGold or generate 75.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

TomaGold  vs.  Labrador Gold Corp

TomaGold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TomaGold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, TomaGold reported solid returns over the last few months and may actually be approaching a breakup point.

Labrador Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TomaGold and Labrador Gold

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

The idea behind TomaGold and Labrador Gold 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.