Correlation Between Cerrado Gold and First Mining

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

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

Diversification Opportunities for Cerrado Gold and First Mining

0.62

Correlation Coefficient

Cerrado Gold  First Mining

Poor diversification

The 3 months correlation between Cerrado and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cerrado Gold and First Mining Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mining Gold and Cerrado Gold 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 Cerrado Gold are associated (or correlated) with First Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mining Gold has no effect on the direction of Cerrado Gold i.e., Cerrado Gold and First Mining go up and down completely randomly.

Pair Corralation between Cerrado Gold and First Mining

Assuming the 90 days horizon Cerrado Gold is expected to generate 0.76 times more return on investment than First Mining. However, Cerrado Gold is 1.32 times less risky than First Mining. It trades about 0.07 of its potential returns per unit of risk. First Mining Gold is currently generating about 0.05 per unit of risk. If you would invest  47.00  in Cerrado Gold on May 1, 2025 and sell it today you would earn a total of  7.00  from holding Cerrado Gold or generate 14.89% return on investment over 90 days.

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

Cerrado Gold  vs.  First Mining Gold

Cerrado Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cerrado Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cerrado Gold reported solid returns over the last few months and may actually be approaching a breakup point.

First Mining Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Mining Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cerrado Gold and First Mining

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

The idea behind Cerrado Gold and First Mining Gold 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.