Correlation Between GDI Integrated and Imperial Metals

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

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

Diversification Opportunities for GDI Integrated and Imperial Metals

-0.52

Correlation Coefficient

GDI Integrated  Imperial Metals

Excellent diversification

The 3 months correlation between GDI and Imperial is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding GDI Integrated and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals and GDI Integrated 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 GDI Integrated are associated (or correlated) with Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of GDI Integrated i.e., GDI Integrated and Imperial Metals go up and down completely randomly.

Pair Corralation between GDI Integrated and Imperial Metals

Assuming the 90 days trading horizon GDI Integrated is expected to under-perform the Imperial Metals. But the stock apears to be less risky and, when comparing its historical volatility, GDI Integrated is 1.78 times less risky than Imperial Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Imperial Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  214.00  in Imperial Metals on October 6, 2024 and sell it today you would lose (23.00) from holding Imperial Metals or give up 10.75% of portfolio value over 90 days.

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

GDI Integrated  vs.  Imperial Metals

GDI Integrated

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GDI Integrated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, GDI Integrated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GDI Integrated and Imperial Metals

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

The idea behind GDI Integrated and Imperial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..