Correlation Between Compania and Goliath Resources

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

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

Diversification Opportunities for Compania and Goliath Resources

0.67

Correlation Coefficient

Compania  Goliath Resources

Poor diversification

The 3 months correlation between Compania and Goliath is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Goliath Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goliath Resources and Compania 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 Compania de Minas 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 Compania i.e., Compania and Goliath Resources go up and down completely randomly.

Pair Corralation between Compania and Goliath Resources

Considering the 90-day investment horizon Compania de Minas is expected to generate 0.74 times more return on investment than Goliath Resources. However, Compania de Minas is 1.36 times less risky than Goliath Resources. It trades about 0.03 of its potential returns per unit of risk. Goliath Resources Limited is currently generating about -0.05 per unit of risk. If you would invest  1,176  in Compania de Minas on September 2, 2024 and sell it today you would earn a total of  34.00  from holding Compania de Minas or generate 2.89% return on investment over 90 days.

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

Compania de Minas  vs.  Goliath Resources Limited

Compania de Minas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Goliath Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goliath Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Compania and Goliath Resources

The main advantage of trading using opposite Compania and Goliath Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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 Compania de Minas and Goliath Resources Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.