Correlation Between Gensource Potash and Boss Resources

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

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

Diversification Opportunities for Gensource Potash and Boss Resources

0.89

Correlation Coefficient

Gensource Potash  Boss Resources

Very poor diversification

The 3 months correlation between Gensource and Boss is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gensource Potash and Boss Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boss Resources and Gensource Potash 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 Gensource Potash are associated (or correlated) with Boss Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boss Resources has no effect on the direction of Gensource Potash i.e., Gensource Potash and Boss Resources go up and down completely randomly.

Pair Corralation between Gensource Potash and Boss Resources

Assuming the 90 days horizon Gensource Potash is expected to generate 14.25 times more return on investment than Boss Resources. However, Gensource Potash is 14.25 times more volatile than Boss Resources. It trades about 0.1 of its potential returns per unit of risk. Boss Resources is currently generating about 0.02 per unit of risk. If you would invest  11.00  in Gensource Potash on October 11, 2024 and sell it today you would lose (9.00) from holding Gensource Potash or give up 81.82% of portfolio value over 90 days.

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

Gensource Potash  vs.  Boss Resources

Gensource Potash

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gensource Potash are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Gensource Potash reported solid returns over the last few months and may actually be approaching a breakup point.

Boss Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boss Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gensource Potash and Boss Resources

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

The idea behind Gensource Potash and Boss Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.