Correlation Between US Gold and Evolution Mining

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

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

Diversification Opportunities for US Gold and Evolution Mining

0.35

Correlation Coefficient

US Gold  Evolution Mining

Weak diversification

The 3 months correlation between USAU and Evolution is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding US Gold Corp and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and US 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 US Gold Corp are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of US Gold i.e., US Gold and Evolution Mining go up and down completely randomly.

Pair Corralation between US Gold and Evolution Mining

Given the investment horizon of 90 days US Gold Corp is expected to generate 1.19 times more return on investment than Evolution Mining. However, US Gold is 1.19 times more volatile than Evolution Mining. It trades about 0.11 of its potential returns per unit of risk. Evolution Mining is currently generating about 0.08 per unit of risk. If you would invest  584.00  in US Gold Corp on September 13, 2024 and sell it today you would earn a total of  148.00  from holding US Gold Corp or generate 25.34% return on investment over 90 days.

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

US Gold Corp  vs.  Evolution Mining

US Gold Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, US Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Evolution Mining

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with US Gold and Evolution Mining

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

The idea behind US Gold Corp and Evolution 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..