Correlation Between Geodrill and Highway 50

Can any of the company-specific risk be diversified away by investing in both Geodrill and Highway 50 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 Highway 50 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Geodrill Limited and Highway 50 Gold, you can compare the effects of market volatilities on Geodrill and Highway 50 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 Highway 50. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Highway 50.

Diversification Opportunities for Geodrill and Highway 50

-0.24

Correlation Coefficient

Geodrill  Highway 50

Very good diversification

The 3 months correlation between Geodrill and Highway is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Highway 50 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway 50 Gold 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 Highway 50. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway 50 Gold has no effect on the direction of Geodrill i.e., Geodrill and Highway 50 go up and down completely randomly.

Pair Corralation between Geodrill and Highway 50

Assuming the 90 days trading horizon Geodrill Limited is expected to under-perform the Highway 50. But the stock apears to be less risky and, when comparing its historical volatility, Geodrill Limited is 30.43 times less risky than Highway 50. The stock trades about -0.02 of its potential returns per unit of risk. The Highway 50 Gold is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Highway 50 Gold on December 4, 2024 and sell it today you would earn a total of  14.00  from holding Highway 50 Gold or generate 58.33% 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.  Highway 50 Gold

Geodrill Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Highway 50 Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Highway 50 Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Highway 50 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and Highway 50

The main advantage of trading using opposite Geodrill and Highway 50 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geodrill position performs unexpectedly, Highway 50 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 Highway 50 will offset losses from the drop in Highway 50's long position.

The idea behind Geodrill Limited and Highway 50 Gold 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.