Correlation Between Defense Metals and Gatekeeper Systems

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

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

Diversification Opportunities for Defense Metals and Gatekeeper Systems

-0.44

Correlation Coefficient

Defense Metals  Gatekeeper Systems

Very good diversification

The 3 months correlation between Defense and Gatekeeper is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Defense Metals Corp and Gatekeeper Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatekeeper Systems and Defense 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 Defense Metals Corp are associated (or correlated) with Gatekeeper Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatekeeper Systems has no effect on the direction of Defense Metals i.e., Defense Metals and Gatekeeper Systems go up and down completely randomly.

Pair Corralation between Defense Metals and Gatekeeper Systems

Assuming the 90 days trading horizon Defense Metals is expected to generate 4.11 times less return on investment than Gatekeeper Systems. In addition to that, Defense Metals is 1.46 times more volatile than Gatekeeper Systems. It trades about 0.01 of its total potential returns per unit of risk. Gatekeeper Systems is currently generating about 0.03 per unit of volatility. If you would invest  50.00  in Gatekeeper Systems on October 10, 2024 and sell it today you would earn a total of  6.00  from holding Gatekeeper Systems or generate 12.0% return on investment over 90 days.

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

Defense Metals Corp  vs.  Gatekeeper Systems

Defense Metals Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Defense Metals Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Defense Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Gatekeeper Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatekeeper Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Defense Metals and Gatekeeper Systems

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

The idea behind Defense Metals Corp and Gatekeeper Systems 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.