Correlation Between Gold Road and GOLD ROAD

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

Diversification Opportunities for Gold Road and GOLD ROAD

0.96

Correlation Coefficient

Gold Road  GOLD ROAD

Almost no diversification

The 3 months correlation between Gold and GOLD is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of Gold Road i.e., Gold Road and GOLD ROAD go up and down completely randomly.

Pair Corralation between Gold Road and GOLD ROAD

Assuming the 90 days horizon Gold Road Resources is expected to generate 0.89 times more return on investment than GOLD ROAD. However, Gold Road Resources is 1.12 times less risky than GOLD ROAD. It trades about 0.29 of its potential returns per unit of risk. GOLD ROAD RES is currently generating about 0.24 per unit of risk. If you would invest  110.00  in Gold Road Resources on September 12, 2024 and sell it today you would earn a total of  20.00  from holding Gold Road Resources or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Gold Road Resources  vs.  GOLD ROAD RES

Gold Road Resources

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 18 (%) 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.

GOLD ROAD RES

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and GOLD ROAD

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

The idea behind Gold Road Resources and GOLD ROAD RES 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 Global Correlations module to find global opportunities by holding instruments from different markets.