Correlation Between Gold Fields and New Gold

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

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

Diversification Opportunities for Gold Fields and New Gold

0.84

Correlation Coefficient

Gold Fields  New Gold

Very poor diversification

The 3 months correlation between Gold and New is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and New Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Gold and Gold Fields 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 Fields Ltd are associated (or correlated) with New Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Gold has no effect on the direction of Gold Fields i.e., Gold Fields and New Gold go up and down completely randomly.

Pair Corralation between Gold Fields and New Gold

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.75 times more return on investment than New Gold. However, Gold Fields Ltd is 1.33 times less risky than New Gold. It trades about 0.22 of its potential returns per unit of risk. New Gold is currently generating about 0.06 per unit of risk. If you would invest  1,446  in Gold Fields Ltd on January 9, 2025 and sell it today you would earn a total of  592.00  from holding Gold Fields Ltd or generate 40.94% return on investment over 90 days.

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

Gold Fields Ltd  vs.  New Gold

Gold Fields

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

New Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, New Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and New Gold

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

The idea behind Gold Fields Ltd and New 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.