Correlation Between Bullion Gold and Pure Energy

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

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

Diversification Opportunities for Bullion Gold and Pure Energy

-0.19

Correlation Coefficient

Bullion Gold  Pure Energy

Good diversification

The 3 months correlation between Bullion and Pure is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bullion Gold Resources and Pure Energy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Energy Minerals and Bullion 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 Bullion Gold Resources are associated (or correlated) with Pure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Energy Minerals has no effect on the direction of Bullion Gold i.e., Bullion Gold and Pure Energy go up and down completely randomly.

Pair Corralation between Bullion Gold and Pure Energy

Assuming the 90 days horizon Bullion Gold Resources is expected to generate 0.55 times more return on investment than Pure Energy. However, Bullion Gold Resources is 1.82 times less risky than Pure Energy. It trades about 0.02 of its potential returns per unit of risk. Pure Energy Minerals is currently generating about 0.0 per unit of risk. If you would invest  1.82  in Bullion Gold Resources on September 15, 2024 and sell it today you would earn a total of  0.02  from holding Bullion Gold Resources or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Bullion Gold Resources  vs.  Pure Energy Minerals

Bullion Gold Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bullion Gold Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bullion Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pure Energy Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Energy Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Pure Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bullion Gold and Pure Energy

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

The idea behind Bullion Gold Resources and Pure Energy Minerals 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.