Correlation Between Gold Road and Dave Busters

Can any of the company-specific risk be diversified away by investing in both Gold Road and Dave Busters 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 Dave Busters 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 Dave Busters Entertainment, you can compare the effects of market volatilities on Gold Road and Dave Busters 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 Dave Busters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and Dave Busters.

Diversification Opportunities for Gold Road and Dave Busters

0.31

Correlation Coefficient

Gold Road  Dave Busters

Weak diversification

The 3 months correlation between Gold and Dave is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Dave Busters Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Busters Enterta 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 Dave Busters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Busters Enterta has no effect on the direction of Gold Road i.e., Gold Road and Dave Busters go up and down completely randomly.

Pair Corralation between Gold Road and Dave Busters

Assuming the 90 days horizon Gold Road Resources is expected to generate 0.91 times more return on investment than Dave Busters. However, Gold Road Resources is 1.09 times less risky than Dave Busters. It trades about 0.02 of its potential returns per unit of risk. Dave Busters Entertainment is currently generating about -0.06 per unit of risk. If you would invest  118.00  in Gold Road Resources on September 17, 2024 and sell it today you would earn a total of  8.00  from holding Gold Road Resources or generate 6.78% 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 Resources  vs.  Dave Busters Entertainment

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 uncertain basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dave Busters is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gold Road and Dave Busters

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

The idea behind Gold Road Resources and Dave Busters Entertainment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.