Correlation Between Gold Royalty and Compania

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

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

Diversification Opportunities for Gold Royalty and Compania

0.67

Correlation Coefficient

Gold Royalty  Compania

Poor diversification

The 3 months correlation between Gold and Compania is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gold Royalty Corp and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and Gold Royalty 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 Royalty Corp are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Gold Royalty i.e., Gold Royalty and Compania go up and down completely randomly.

Pair Corralation between Gold Royalty and Compania

Given the investment horizon of 90 days Gold Royalty Corp is expected to generate 1.64 times more return on investment than Compania. However, Gold Royalty is 1.64 times more volatile than Compania de Minas. It trades about 0.07 of its potential returns per unit of risk. Compania de Minas is currently generating about -0.04 per unit of risk. If you would invest  192.00  in Gold Royalty Corp on January 26, 2024 and sell it today you would earn a total of  7.00  from holding Gold Royalty Corp or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Gold Royalty Corp  vs.  Compania de Minas

Gold Royalty Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Royalty Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Gold Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Compania de Minas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gold Royalty and Compania

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

The idea behind Gold Royalty Corp and Compania de Minas 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.