Correlation Between Geodrill and Chatham Rock

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

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

Diversification Opportunities for Geodrill and Chatham Rock

0.0

Correlation Coefficient

Geodrill  Chatham Rock

Pay attention - limited upside

The 3 months correlation between Geodrill and Chatham is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Chatham Rock Phosphate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Rock Phosphate 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 Chatham Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Rock Phosphate has no effect on the direction of Geodrill i.e., Geodrill and Chatham Rock go up and down completely randomly.

Pair Corralation between Geodrill and Chatham Rock

Assuming the 90 days trading horizon Geodrill is expected to generate 2.08 times less return on investment than Chatham Rock. But when comparing it to its historical volatility, Geodrill Limited is 6.08 times less risky than Chatham Rock. It trades about 0.28 of its potential returns per unit of risk. Chatham Rock Phosphate is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Chatham Rock Phosphate on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Chatham Rock Phosphate or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Geodrill Limited  vs.  Chatham Rock Phosphate

Geodrill Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 10 (%) 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.

Chatham Rock Phosphate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Rock Phosphate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Chatham Rock showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and Chatham Rock

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

The idea behind Geodrill Limited and Chatham Rock Phosphate 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.