Correlation Between Labrador Gold and Defense Metals

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

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

Diversification Opportunities for Labrador Gold and Defense Metals

0.28

Correlation Coefficient

Labrador Gold  Defense Metals

Modest diversification

The 3 months correlation between Labrador and Defense is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Gold Corp and Defense Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense Metals Corp and Labrador 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 Labrador Gold Corp are associated (or correlated) with Defense Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense Metals Corp has no effect on the direction of Labrador Gold i.e., Labrador Gold and Defense Metals go up and down completely randomly.

Pair Corralation between Labrador Gold and Defense Metals

Assuming the 90 days horizon Labrador Gold Corp is expected to generate 1.28 times more return on investment than Defense Metals. However, Labrador Gold is 1.28 times more volatile than Defense Metals Corp. It trades about 0.16 of its potential returns per unit of risk. Defense Metals Corp is currently generating about 0.1 per unit of risk. If you would invest  4.80  in Labrador Gold Corp on May 18, 2025 and sell it today you would earn a total of  4.80  from holding Labrador Gold Corp or generate 100.0% return on investment over 90 days.

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

Labrador Gold Corp  vs.  Defense Metals Corp

Labrador Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Labrador Gold Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Labrador Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Defense Metals Corp

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Defense Metals Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Defense Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Labrador Gold and Defense Metals

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

The idea behind Labrador Gold Corp and Defense 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.