Correlation Between Gensource Potash and Talga Group

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

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

Diversification Opportunities for Gensource Potash and Talga Group

-0.14

Correlation Coefficient

Gensource Potash  Talga Group

Good diversification

The 3 months correlation between Gensource and Talga is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gensource Potash and Talga Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talga Group 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 Talga Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talga Group has no effect on the direction of Gensource Potash i.e., Gensource Potash and Talga Group go up and down completely randomly.

Pair Corralation between Gensource Potash and Talga Group

Assuming the 90 days horizon Gensource Potash is expected to generate 10.46 times more return on investment than Talga Group. However, Gensource Potash is 10.46 times more volatile than Talga Group. It trades about 0.14 of its potential returns per unit of risk. Talga Group is currently generating about 0.04 per unit of risk. If you would invest  3.00  in Gensource Potash on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Gensource Potash or generate 133.33% return on investment over 90 days.

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

Gensource Potash  vs.  Talga Group

Gensource Potash

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gensource Potash are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Gensource Potash reported solid returns over the last few months and may actually be approaching a breakup point.

Talga Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gensource Potash and Talga Group

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

The idea behind Gensource Potash and Talga Group 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.