Correlation Between Gander Gold and Tectonic Metals

Can any of the company-specific risk be diversified away by investing in both Gander Gold and Tectonic Metals 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 Gander Gold and Tectonic Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gander Gold and Tectonic Metals, you can compare the effects of market volatilities on Gander Gold and Tectonic Metals 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 Gander Gold with a short position of Tectonic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gander Gold and Tectonic Metals.

Diversification Opportunities for Gander Gold and Tectonic Metals

0.39

Correlation Coefficient

Gander Gold  Tectonic Metals

Weak diversification

The 3 months correlation between Gander and Tectonic is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gander Gold and Tectonic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tectonic Metals and Gander Gold 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 Gander Gold are associated (or correlated) with Tectonic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tectonic Metals has no effect on the direction of Gander Gold i.e., Gander Gold and Tectonic Metals go up and down completely randomly.

Pair Corralation between Gander Gold and Tectonic Metals

Assuming the 90 days horizon Gander Gold is expected to generate 3.33 times more return on investment than Tectonic Metals. However, Gander Gold is 3.33 times more volatile than Tectonic Metals. It trades about 0.02 of its potential returns per unit of risk. Tectonic Metals is currently generating about 0.07 per unit of risk. If you would invest  14.00  in Gander Gold on November 29, 2024 and sell it today you would lose (3.00) from holding Gander Gold or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Gander Gold  vs.  Tectonic Metals

Gander Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gander Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Gander Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Tectonic Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tectonic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gander Gold and Tectonic Metals

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

The idea behind Gander Gold and Tectonic Metals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.