Correlation Between M Line and Sitka Gold

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

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

Diversification Opportunities for M Line and Sitka Gold

0.36

Correlation Coefficient

M Line  Sitka Gold

Weak diversification

The 3 months correlation between MLHC and Sitka is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding M Line Hldgs and Sitka Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitka Gold Corp and M Line 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 M Line Hldgs are associated (or correlated) with Sitka Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitka Gold Corp has no effect on the direction of M Line i.e., M Line and Sitka Gold go up and down completely randomly.

Pair Corralation between M Line and Sitka Gold

Given the investment horizon of 90 days M Line Hldgs is expected to generate 27.1 times more return on investment than Sitka Gold. However, M Line is 27.1 times more volatile than Sitka Gold Corp. It trades about 0.13 of its potential returns per unit of risk. Sitka Gold Corp is currently generating about 0.21 per unit of risk. If you would invest  0.00  in M Line Hldgs on January 9, 2025 and sell it today you would earn a total of  0.01  from holding M Line Hldgs or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

M Line Hldgs  vs.  Sitka Gold Corp

M Line Hldgs

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Line Hldgs are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, M Line exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sitka Gold Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sitka Gold Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Sitka Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M Line and Sitka Gold

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

The idea behind M Line Hldgs and Sitka Gold 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.