Correlation Between Globe Metals and EROAD

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

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

Diversification Opportunities for Globe Metals and EROAD

-0.37

Correlation Coefficient

Globe Metals  EROAD

Very good diversification

The 3 months correlation between Globe and EROAD is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Globe Metals Mining and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Globe Metals 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 Globe Metals Mining are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Globe Metals i.e., Globe Metals and EROAD go up and down completely randomly.

Pair Corralation between Globe Metals and EROAD

Assuming the 90 days trading horizon Globe Metals Mining is expected to under-perform the EROAD. In addition to that, Globe Metals is 1.56 times more volatile than EROAD. It trades about -0.08 of its total potential returns per unit of risk. EROAD is currently generating about -0.03 per unit of volatility. If you would invest  103.00  in EROAD on October 27, 2024 and sell it today you would lose (3.00) from holding EROAD or give up 2.91% of portfolio value over 90 days.

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

Globe Metals Mining  vs.  EROAD

Globe Metals Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Metals Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

EROAD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, EROAD unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Globe Metals and EROAD

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

The idea behind Globe Metals Mining and EROAD 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 Commodity Directory module to find actively traded commodities issued by global exchanges.