Correlation Between Geodrill and Champion Bear

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

By analyzing existing cross correlation between Geodrill Limited and Champion Bear Resources, you can compare the effects of market volatilities on Geodrill and Champion Bear 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 Champion Bear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Champion Bear.

Diversification Opportunities for Geodrill and Champion Bear

-0.26

Correlation Coefficient

Geodrill  Champion Bear

Very good diversification

The 3 months correlation between Geodrill and Champion is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Champion Bear Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Bear Resources 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 Champion Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Bear Resources has no effect on the direction of Geodrill i.e., Geodrill and Champion Bear go up and down completely randomly.

Pair Corralation between Geodrill and Champion Bear

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 0.11 times more return on investment than Champion Bear. However, Geodrill Limited is 9.27 times less risky than Champion Bear. It trades about 0.12 of its potential returns per unit of risk. Champion Bear Resources is currently generating about -0.01 per unit of risk. If you would invest  263.00  in Geodrill Limited on September 18, 2024 and sell it today you would earn a total of  41.00  from holding Geodrill Limited or generate 15.59% return on investment over 90 days.

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

Geodrill Limited  vs.  Champion Bear Resources

Geodrill Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

Champion Bear Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Bear Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Geodrill and Champion Bear

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

The idea behind Geodrill Limited and Champion Bear Resources 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.