Correlation Between US GoldMining and Rose Hill

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

By analyzing existing cross correlation between US GoldMining Common and Rose Hill Acquisition, you can compare the effects of market volatilities on US GoldMining and Rose Hill 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 GoldMining with a short position of Rose Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of US GoldMining and Rose Hill.

Diversification Opportunities for US GoldMining and Rose Hill

Average diversification

The 3 months correlation between USGO and Rose is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding US GoldMining Common and Rose Hill Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rose Hill Acquisition and US GoldMining 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 GoldMining Common are associated (or correlated) with Rose Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rose Hill Acquisition has no effect on the direction of US GoldMining i.e., US GoldMining and Rose Hill go up and down completely randomly.

Pair Corralation between US GoldMining and Rose Hill

Given the investment horizon of 90 days US GoldMining Common is expected to generate 7.31 times more return on investment than Rose Hill. However, US GoldMining is 7.31 times more volatile than Rose Hill Acquisition. It trades about 0.0 of its potential returns per unit of risk. Rose Hill Acquisition is currently generating about -0.1 per unit of risk. If you would invest  796.00  in US GoldMining Common on September 2, 2023 and sell it today you would lose (31.00) from holding US GoldMining Common or give up 3.89% of portfolio value over 90 days.

US GoldMining Common  vs.  Rose Hill Acquisition

US GoldMining Common

USGO Performance

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Over the last 90 days US GoldMining Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2024. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Rose Hill Acquisition

Rose Performance

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Over the last 90 days Rose Hill Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rose Hill is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with US GoldMining and Rose Hill

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

The idea behind US GoldMining Common and Rose Hill Acquisition 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 Global Correlations module to find global opportunities by holding instruments from different markets.