Correlation Between Geodrill and Black Mammoth

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

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

Diversification Opportunities for Geodrill and Black Mammoth

0.46

Correlation Coefficient

Geodrill  Black Mammoth

Very weak diversification

The 3 months correlation between Geodrill and Black is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Black Mammoth Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Mammoth Metals and Geodrill 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 Geodrill Limited are associated (or correlated) with Black Mammoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Mammoth Metals has no effect on the direction of Geodrill i.e., Geodrill and Black Mammoth go up and down completely randomly.

Pair Corralation between Geodrill and Black Mammoth

Assuming the 90 days trading horizon Geodrill Limited is expected to under-perform the Black Mammoth. But the stock apears to be less risky and, when comparing its historical volatility, Geodrill Limited is 3.26 times less risky than Black Mammoth. The stock trades about -0.13 of its potential returns per unit of risk. The Black Mammoth Metals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Black Mammoth Metals on December 5, 2024 and sell it today you would earn a total of  19.00  from holding Black Mammoth Metals or generate 17.12% return on investment over 90 days.

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

Geodrill Limited  vs.  Black Mammoth Metals

Geodrill Limited

Risk-Adjusted Performance

Weak

Over the last 90 days Geodrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Geodrill is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Black Mammoth Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Mammoth Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Black Mammoth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and Black Mammoth

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

The idea behind Geodrill Limited and Black Mammoth 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.