Correlation Between Bald Eagle and Discovery Metals

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

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

Diversification Opportunities for Bald Eagle and Discovery Metals

0.07

Correlation Coefficient

Bald Eagle  Discovery Metals

Significant diversification

The 3 months correlation between Bald and Discovery is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bald Eagle Gold and Discovery Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Metals Corp and Bald Eagle 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 Bald Eagle Gold are associated (or correlated) with Discovery Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Metals Corp has no effect on the direction of Bald Eagle i.e., Bald Eagle and Discovery Metals go up and down completely randomly.

Pair Corralation between Bald Eagle and Discovery Metals

Assuming the 90 days horizon Bald Eagle Gold is expected to generate 1.9 times more return on investment than Discovery Metals. However, Bald Eagle is 1.9 times more volatile than Discovery Metals Corp. It trades about 0.09 of its potential returns per unit of risk. Discovery Metals Corp is currently generating about 0.01 per unit of risk. If you would invest  8.02  in Bald Eagle Gold on February 26, 2024 and sell it today you would earn a total of  50.98  from holding Bald Eagle Gold or generate 635.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bald Eagle Gold  vs.  Discovery Metals Corp

Bald Eagle Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bald Eagle Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Bald Eagle may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Discovery Metals Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Metals Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Discovery Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bald Eagle and Discovery Metals

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

The idea behind Bald Eagle Gold and Discovery Metals 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 Valuation module to check real value of public entities based on technical and fundamental data.