Correlation Between Gold Road and Newmont Goldcorp

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Can any of the company-specific risk be diversified away by investing in both Gold Road and Newmont Goldcorp 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 Gold Road and Newmont Goldcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Road Resources and Newmont Goldcorp Corp, you can compare the effects of market volatilities on Gold Road and Newmont Goldcorp 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 Gold Road with a short position of Newmont Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and Newmont Goldcorp.

Diversification Opportunities for Gold Road and Newmont Goldcorp

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Gold and Newmont is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Newmont Goldcorp Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont Goldcorp Corp and Gold Road 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 Gold Road Resources are associated (or correlated) with Newmont Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont Goldcorp Corp has no effect on the direction of Gold Road i.e., Gold Road and Newmont Goldcorp go up and down completely randomly.

Pair Corralation between Gold Road and Newmont Goldcorp

Assuming the 90 days horizon Gold Road is expected to generate 1.7 times less return on investment than Newmont Goldcorp. In addition to that, Gold Road is 1.62 times more volatile than Newmont Goldcorp Corp. It trades about 0.14 of its total potential returns per unit of risk. Newmont Goldcorp Corp is currently generating about 0.39 per unit of volatility. If you would invest  2,964  in Newmont Goldcorp Corp on December 30, 2023 and sell it today you would earn a total of  620.00  from holding Newmont Goldcorp Corp or generate 20.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Gold Road Resources  vs.  Newmont Goldcorp Corp

 Performance 
       Timeline  
Gold Road Resources 

Risk-Adjusted Performance

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Over the last 90 days Gold Road Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Newmont Goldcorp Corp 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Newmont Goldcorp Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Gold Road and Newmont Goldcorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gold Road and Newmont Goldcorp

The main advantage of trading using opposite Gold Road and Newmont Goldcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, Newmont Goldcorp 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 Newmont Goldcorp will offset losses from the drop in Newmont Goldcorp's long position.
The idea behind Gold Road Resources and Newmont Goldcorp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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