Correlation Between Gold Road and Patterson Companies

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

Diversification Opportunities for Gold Road and Patterson Companies

0.76

Correlation Coefficient

Gold Road  Patterson Companies

Poor diversification

The 3 months correlation between Gold and Patterson is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Gold Road i.e., Gold Road and Patterson Companies go up and down completely randomly.

Pair Corralation between Gold Road and Patterson Companies

Assuming the 90 days horizon Gold Road Resources is expected to generate 1.05 times more return on investment than Patterson Companies. However, Gold Road is 1.05 times more volatile than Patterson Companies. It trades about 0.04 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.03 per unit of risk. If you would invest  90.00  in Gold Road Resources on October 10, 2024 and sell it today you would earn a total of  35.00  from holding Gold Road Resources or generate 38.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Gold Road Resources  vs.  Patterson Companies

Gold Road Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 11 (%) 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.

Patterson Companies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Patterson Companies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and Patterson Companies

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

The idea behind Gold Road Resources and Patterson Companies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.