Correlation Between Gold Road and Globex Mining

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

Diversification Opportunities for Gold Road and Globex Mining

0.73

Correlation Coefficient

Gold Road  Globex Mining

Poor diversification

The 3 months correlation between Gold and Globex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of Gold Road i.e., Gold Road and Globex Mining go up and down completely randomly.

Pair Corralation between Gold Road and Globex Mining

Assuming the 90 days horizon Gold Road is expected to generate 1.1 times less return on investment than Globex Mining. In addition to that, Gold Road is 1.52 times more volatile than Globex Mining Enterprises. It trades about 0.04 of its total potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.07 per unit of volatility. If you would invest  59.00  in Globex Mining Enterprises on October 8, 2024 and sell it today you would earn a total of  20.00  from holding Globex Mining Enterprises or generate 33.9% return on investment over 90 days.

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

Gold Road Resources  vs.  Globex Mining Enterprises

Gold Road Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 10 (%) 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.

Globex Mining Enterprises

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Globex Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and Globex Mining

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

The idea behind Gold Road Resources and Globex Mining Enterprises 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.