Correlation Between Dundee Precious and Karora Resources

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

By analyzing existing cross correlation between Dundee Precious Metals and Karora Resources, you can compare the effects of market volatilities on Dundee Precious and Karora Resources 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 Dundee Precious with a short position of Karora Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dundee Precious and Karora Resources.

Diversification Opportunities for Dundee Precious and Karora Resources

0.89

Correlation Coefficient

Dundee Precious  Karora Resources

Very poor diversification

The 3 months correlation between Dundee and Karora is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Karora Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karora Resources and Dundee Precious 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 Dundee Precious Metals are associated (or correlated) with Karora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karora Resources has no effect on the direction of Dundee Precious i.e., Dundee Precious and Karora Resources go up and down completely randomly.

Pair Corralation between Dundee Precious and Karora Resources

Assuming the 90 days trading horizon Dundee Precious Metals is expected to generate 0.73 times more return on investment than Karora Resources. However, Dundee Precious Metals is 1.38 times less risky than Karora Resources. It trades about 0.05 of its potential returns per unit of risk. Karora Resources is currently generating about 0.01 per unit of risk. If you would invest  676.00  in Dundee Precious Metals on January 17, 2024 and sell it today you would earn a total of  373.00  from holding Dundee Precious Metals or generate 55.18% return on investment over 90 days.

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

Dundee Precious Metals  vs.  Karora Resources

Dundee Precious Metals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Precious Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Dundee Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Karora Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Karora Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Karora Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dundee Precious and Karora Resources

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

The idea behind Dundee Precious Metals and Karora Resources 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.