Correlation Between Hercules Metals and Goliath Resources

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

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

Diversification Opportunities for Hercules Metals and Goliath Resources

0.01

Correlation Coefficient

Hercules Metals  Goliath Resources

Significant diversification

The 3 months correlation between Hercules and Goliath is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Metals Corp and Goliath Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goliath Resources and Hercules Metals 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 Hercules Metals Corp are associated (or correlated) with Goliath Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goliath Resources has no effect on the direction of Hercules Metals i.e., Hercules Metals and Goliath Resources go up and down completely randomly.

Pair Corralation between Hercules Metals and Goliath Resources

Assuming the 90 days horizon Hercules Metals is expected to generate 49.74 times less return on investment than Goliath Resources. But when comparing it to its historical volatility, Hercules Metals Corp is 2.38 times less risky than Goliath Resources. It trades about 0.02 of its potential returns per unit of risk. Goliath Resources is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Goliath Resources on October 27, 2024 and sell it today you would earn a total of  63.00  from holding Goliath Resources or generate 60.0% return on investment over 90 days.

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

Hercules Metals Corp  vs.  Goliath Resources

Hercules Metals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hercules Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Goliath Resources

Risk-Adjusted Performance

9 of 100

Modest

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

Pair Trading with Hercules Metals and Goliath Resources

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

The idea behind Hercules Metals Corp and Goliath 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.