Correlation Between Contango ORE and Discovery Metals

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

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

Diversification Opportunities for Contango ORE and Discovery Metals

0.67

Correlation Coefficient

Contango ORE  Discovery Metals

Poor diversification

The 3 months correlation between Contango and Discovery is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE 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 Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Discovery Metals go up and down completely randomly.

Pair Corralation between Contango ORE and Discovery Metals

Given the investment horizon of 90 days Contango ORE is expected to generate 3.36 times less return on investment than Discovery Metals. But when comparing it to its historical volatility, Contango ORE is 1.18 times less risky than Discovery Metals. It trades about 0.04 of its potential returns per unit of risk. Discovery Metals Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  229.00  in Discovery Metals Corp on May 27, 2025 and sell it today you would earn a total of  59.00  from holding Discovery Metals Corp or generate 25.76% return on investment over 90 days.

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

Contango ORE  vs.  Discovery Metals Corp

Contango ORE

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Contango ORE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Contango ORE may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Discovery Metals Corp

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Metals Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Discovery Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Contango ORE and Discovery Metals

The main advantage of trading using opposite Contango ORE and Discovery Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE 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 Commodity Directory module to find actively traded commodities issued by global exchanges.