Correlation Between Gold Road and ARES MREAL

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

By analyzing existing cross correlation between Gold Road Resources and ARES MREAL ESTDL 01, you can compare the effects of market volatilities on Gold Road and ARES MREAL 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 ARES MREAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and ARES MREAL.

Diversification Opportunities for Gold Road and ARES MREAL

-0.33

Correlation Coefficient

Gold Road  ARES MREAL

Very good diversification

The 3 months correlation between Gold and ARES is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and ARES MREAL ESTDL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARES MREAL ESTDL 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 Resources are associated (or correlated) with ARES MREAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARES MREAL ESTDL has no effect on the direction of Gold Road i.e., Gold Road and ARES MREAL go up and down completely randomly.

Pair Corralation between Gold Road and ARES MREAL

Assuming the 90 days horizon Gold Road Resources is expected to generate 1.25 times more return on investment than ARES MREAL. However, Gold Road is 1.25 times more volatile than ARES MREAL ESTDL 01. It trades about 0.04 of its potential returns per unit of risk. ARES MREAL ESTDL 01 is currently generating about -0.03 per unit of risk. If you would invest  96.00  in Gold Road Resources on October 25, 2024 and sell it today you would earn a total of  51.00  from holding Gold Road Resources or generate 53.13% return on investment over 90 days.

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

Gold Road Resources  vs.  ARES MREAL ESTDL 01

Gold Road Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

ARES MREAL ESTDL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARES MREAL ESTDL 01 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ARES MREAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gold Road and ARES MREAL

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

The idea behind Gold Road Resources and ARES MREAL ESTDL 01 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.