Correlation Between Dynacor Gold and Geodrill

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

By analyzing existing cross correlation between Dynacor Gold Mines and Geodrill Limited, you can compare the effects of market volatilities on Dynacor Gold and Geodrill 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 Dynacor Gold with a short position of Geodrill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynacor Gold and Geodrill.

Diversification Opportunities for Dynacor Gold and Geodrill

0.66

Correlation Coefficient

Dynacor Gold  Geodrill

Poor diversification

The 3 months correlation between Dynacor and Geodrill is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dynacor Gold Mines and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited and Dynacor Gold 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 Dynacor Gold Mines are associated (or correlated) with Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of Dynacor Gold i.e., Dynacor Gold and Geodrill go up and down completely randomly.

Pair Corralation between Dynacor Gold and Geodrill

Assuming the 90 days trading horizon Dynacor Gold Mines is expected to generate 0.82 times more return on investment than Geodrill. However, Dynacor Gold Mines is 1.22 times less risky than Geodrill. It trades about 0.19 of its potential returns per unit of risk. Geodrill Limited is currently generating about 0.08 per unit of risk. If you would invest  487.00  in Dynacor Gold Mines on September 3, 2024 and sell it today you would earn a total of  110.00  from holding Dynacor Gold Mines or generate 22.59% return on investment over 90 days.

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

Dynacor Gold Mines  vs.  Geodrill Limited

Dynacor Gold Mines

Risk-Adjusted Performance

14 of 100

Good

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

Geodrill Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dynacor Gold and Geodrill

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

The idea behind Dynacor Gold Mines and Geodrill 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.