Correlation Between Outcrop Gold and Lahontan Gold

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

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

Diversification Opportunities for Outcrop Gold and Lahontan Gold

0.67

Correlation Coefficient

Outcrop Gold  Lahontan Gold

Poor diversification

The 3 months correlation between Outcrop and Lahontan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Outcrop Gold Corp and Lahontan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lahontan Gold Corp and Outcrop 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 Outcrop Gold Corp are associated (or correlated) with Lahontan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lahontan Gold Corp has no effect on the direction of Outcrop Gold i.e., Outcrop Gold and Lahontan Gold go up and down completely randomly.

Pair Corralation between Outcrop Gold and Lahontan Gold

Assuming the 90 days horizon Outcrop Gold is expected to generate 1.66 times less return on investment than Lahontan Gold. But when comparing it to its historical volatility, Outcrop Gold Corp is 1.09 times less risky than Lahontan Gold. It trades about 0.12 of its potential returns per unit of risk. Lahontan Gold Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Lahontan Gold Corp on May 7, 2025 and sell it today you would earn a total of  4.00  from holding Lahontan Gold Corp or generate 66.67% return on investment over 90 days.

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

Outcrop Gold Corp  vs.  Lahontan Gold Corp

Outcrop Gold Corp

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Outcrop Gold Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Outcrop Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Lahontan Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lahontan Gold Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lahontan Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Outcrop Gold and Lahontan Gold

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

The idea behind Outcrop Gold Corp and Lahontan 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.