Correlation Between Gold Road and Bank of America

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

Diversification Opportunities for Gold Road and Bank of America

0.53

Correlation Coefficient

Gold Road  Bank of America

Very weak diversification

The 3 months correlation between Gold and Bank is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Gold Road i.e., Gold Road and Bank of America go up and down completely randomly.

Pair Corralation between Gold Road and Bank of America

Assuming the 90 days horizon Gold Road Resources is expected to generate 1.48 times more return on investment than Bank of America. However, Gold Road is 1.48 times more volatile than Verizon Communications. It trades about 0.2 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.07 per unit of risk. If you would invest  118.00  in Gold Road Resources on December 27, 2024 and sell it today you would earn a total of  43.00  from holding Gold Road Resources or generate 36.44% return on investment over 90 days.

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

Gold Road Resources  vs.  Verizon Communications

Gold Road Resources

Risk-Adjusted Performance

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.

Verizon Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gold Road and Bank of America

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

The idea behind Gold Road Resources and Verizon Communications 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.