Correlation Between Gold Road and CosmoSteel Holdings

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

Diversification Opportunities for Gold Road and CosmoSteel Holdings

0.53

Correlation Coefficient

Gold Road  CosmoSteel Holdings

Very weak diversification

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

Pair Corralation between Gold Road and CosmoSteel Holdings

Assuming the 90 days horizon Gold Road Resources is expected to generate 0.74 times more return on investment than CosmoSteel Holdings. However, Gold Road Resources is 1.36 times less risky than CosmoSteel Holdings. It trades about 0.16 of its potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about 0.05 per unit of risk. If you would invest  99.00  in Gold Road Resources on September 20, 2024 and sell it today you would earn a total of  25.00  from holding Gold Road Resources or generate 25.25% 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.  CosmoSteel Holdings Limited

Gold Road Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 12 (%) 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.

CosmoSteel Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CosmoSteel Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gold Road and CosmoSteel Holdings

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

The idea behind Gold Road Resources and CosmoSteel Holdings Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.