Correlation Between GOLD ROAD and FIRST NATIONAL

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

By analyzing existing cross correlation between GOLD ROAD RES and FIRST NATIONAL FIN, you can compare the effects of market volatilities on GOLD ROAD and FIRST NATIONAL 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 GOLD ROAD with a short position of FIRST NATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and FIRST NATIONAL.

Diversification Opportunities for GOLD ROAD and FIRST NATIONAL

0.27

Correlation Coefficient

GOLD ROAD  FIRST NATIONAL

Modest diversification

The 3 months correlation between GOLD and FIRST is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and FIRST NATIONAL FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST NATIONAL FIN and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with FIRST NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST NATIONAL FIN has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and FIRST NATIONAL go up and down completely randomly.

Pair Corralation between GOLD ROAD and FIRST NATIONAL

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.18 times more return on investment than FIRST NATIONAL. However, GOLD ROAD is 1.18 times more volatile than FIRST NATIONAL FIN. It trades about 0.03 of its potential returns per unit of risk. FIRST NATIONAL FIN is currently generating about -0.16 per unit of risk. If you would invest  121.00  in GOLD ROAD RES on October 5, 2024 and sell it today you would earn a total of  1.00  from holding GOLD ROAD RES or generate 0.83% return on investment over 90 days.

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

GOLD ROAD RES  vs.  FIRST NATIONAL FIN

GOLD ROAD RES

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days GOLD ROAD RES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

FIRST NATIONAL FIN

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days FIRST NATIONAL FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, FIRST NATIONAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GOLD ROAD and FIRST NATIONAL

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

The idea behind GOLD ROAD RES and FIRST NATIONAL FIN 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.