Correlation Between Gold Road and Industrial

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

Diversification Opportunities for Gold Road and Industrial

0.81

Correlation Coefficient

Gold Road  Industrial

Very poor diversification

The 3 months correlation between Gold and Industrial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Gold Road i.e., Gold Road and Industrial go up and down completely randomly.

Pair Corralation between Gold Road and Industrial

Assuming the 90 days horizon Gold Road Resources is expected to generate 0.78 times more return on investment than Industrial. However, Gold Road Resources is 1.28 times less risky than Industrial. It trades about 0.11 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.05 per unit of risk. If you would invest  101.00  in Gold Road Resources on September 3, 2024 and sell it today you would earn a total of  17.00  from holding Gold Road Resources or generate 16.83% 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.  Industrial and Commercial

Gold Road Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 8 (%) 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.

Industrial and Commercial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gold Road and Industrial

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

The idea behind Gold Road Resources and Industrial and Commercial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.