Correlation Between Contango ORE and Gold Royalty

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

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

Diversification Opportunities for Contango ORE and Gold Royalty

0.73

Correlation Coefficient

Contango ORE  Gold Royalty

Poor diversification

The 3 months correlation between Contango and Gold is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Gold Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Royalty 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 Gold Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Royalty Corp has no effect on the direction of Contango ORE i.e., Contango ORE and Gold Royalty go up and down completely randomly.

Pair Corralation between Contango ORE and Gold Royalty

Given the investment horizon of 90 days Contango ORE is expected to generate 1.46 times more return on investment than Gold Royalty. However, Contango ORE is 1.46 times more volatile than Gold Royalty Corp. It trades about 0.19 of its potential returns per unit of risk. Gold Royalty Corp is currently generating about 0.03 per unit of risk. If you would invest  1,348  in Contango ORE on February 19, 2025 and sell it today you would earn a total of  283.00  from holding Contango ORE or generate 20.99% 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.  Gold Royalty Corp

Contango ORE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Contango ORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Contango ORE displayed solid returns over the last few months and may actually be approaching a breakup point.

Gold Royalty Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Royalty Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Gold Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Contango ORE and Gold Royalty

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

The idea behind Contango ORE and Gold Royalty 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.