Correlation Between Cerrado Gold and Empress Royalty

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

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

Diversification Opportunities for Cerrado Gold and Empress Royalty

0.43

Correlation Coefficient

Cerrado Gold  Empress Royalty

Very weak diversification

The 3 months correlation between Cerrado and Empress is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cerrado Gold Corp and Empress Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empress Royalty Corp and Cerrado 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 Cerrado Gold Corp are associated (or correlated) with Empress Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empress Royalty Corp has no effect on the direction of Cerrado Gold i.e., Cerrado Gold and Empress Royalty go up and down completely randomly.

Pair Corralation between Cerrado Gold and Empress Royalty

Assuming the 90 days trading horizon Cerrado Gold Corp is expected to under-perform the Empress Royalty. But the stock apears to be less risky and, when comparing its historical volatility, Cerrado Gold Corp is 1.52 times less risky than Empress Royalty. The stock trades about 0.0 of its potential returns per unit of risk. The Empress Royalty Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Empress Royalty Corp on April 22, 2025 and sell it today you would earn a total of  42.00  from holding Empress Royalty Corp or generate 85.71% return on investment over 90 days.

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

Cerrado Gold Corp  vs.  Empress Royalty Corp

Cerrado Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cerrado Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cerrado Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Empress Royalty Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empress Royalty Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Empress Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cerrado Gold and Empress Royalty

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

The idea behind Cerrado Gold Corp and Empress 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.