Correlation Between Geodrill and Talon Metals

Can any of the company-specific risk be diversified away by investing in both Geodrill and Talon 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 Talon 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 Talon Metals Corp, you can compare the effects of market volatilities on Geodrill and Talon 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 Talon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Talon Metals.

Diversification Opportunities for Geodrill and Talon Metals

-0.13

Correlation Coefficient

Geodrill  Talon Metals

Good diversification

The 3 months correlation between Geodrill and Talon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon 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 Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Geodrill i.e., Geodrill and Talon Metals go up and down completely randomly.

Pair Corralation between Geodrill and Talon Metals

Assuming the 90 days trading horizon Geodrill Limited is expected to under-perform the Talon Metals. But the stock apears to be less risky and, when comparing its historical volatility, Geodrill Limited is 4.0 times less risky than Talon Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Talon Metals Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Talon Metals Corp on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Talon Metals Corp or generate 33.33% 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.  Talon Metals Corp

Geodrill Limited

Risk-Adjusted Performance

Very 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.

Talon Metals Corp

Risk-Adjusted Performance

OK

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

Pair Trading with Geodrill and Talon Metals

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

The idea behind Geodrill Limited and Talon 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.