Correlation Between Geodrill and Grid Metals

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

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

Diversification Opportunities for Geodrill and Grid Metals

0.27

Correlation Coefficient

Geodrill  Grid Metals

Modest diversification

The 3 months correlation between Geodrill and Grid is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Geodrill i.e., Geodrill and Grid Metals go up and down completely randomly.

Pair Corralation between Geodrill and Grid Metals

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 0.39 times more return on investment than Grid Metals. However, Geodrill Limited is 2.54 times less risky than Grid Metals. It trades about 0.1 of its potential returns per unit of risk. Grid Metals Corp is currently generating about -0.02 per unit of risk. If you would invest  181.00  in Geodrill Limited on September 13, 2024 and sell it today you would earn a total of  131.00  from holding Geodrill Limited or generate 72.38% return on investment over 90 days.

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

Geodrill Limited  vs.  Grid Metals Corp

Geodrill Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 11 (%) 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.

Grid Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Grid Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and Grid Metals

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

The idea behind Geodrill Limited and Grid Metals Corp 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 Channel module to use Commodity Channel Index to analyze current equity momentum.