Correlation Between Gold Road and Apple

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

Diversification Opportunities for Gold Road and Apple

0.82

Correlation Coefficient

Gold Road  Apple

Very poor diversification

The 3 months correlation between Gold and Apple is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Gold Road i.e., Gold Road and Apple go up and down completely randomly.

Pair Corralation between Gold Road and Apple

Assuming the 90 days horizon Gold Road Resources is expected to generate 1.96 times more return on investment than Apple. However, Gold Road is 1.96 times more volatile than Apple Inc. It trades about 0.18 of its potential returns per unit of risk. Apple Inc is currently generating about 0.26 per unit of risk. If you would invest  98.00  in Gold Road Resources on September 15, 2024 and sell it today you would earn a total of  28.00  from holding Gold Road Resources or generate 28.57% return on investment over 90 days.

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

Gold Road Resources  vs.  Apple Inc

Gold Road Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and Apple

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

The idea behind Gold Road Resources and Apple Inc 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.