Correlation Between Geodrill and Winsome Resources

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

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

Diversification Opportunities for Geodrill and Winsome Resources

0.58

Correlation Coefficient

Geodrill  Winsome Resources

Very weak diversification

The 3 months correlation between Geodrill and Winsome is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Winsome Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winsome 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 Winsome Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winsome Resources has no effect on the direction of Geodrill i.e., Geodrill and Winsome Resources go up and down completely randomly.

Pair Corralation between Geodrill and Winsome Resources

Assuming the 90 days horizon Geodrill Limited is expected to generate 0.26 times more return on investment than Winsome Resources. However, Geodrill Limited is 3.85 times less risky than Winsome Resources. It trades about -0.02 of its potential returns per unit of risk. Winsome Resources Limited is currently generating about -0.07 per unit of risk. If you would invest  213.00  in Geodrill Limited on December 30, 2024 and sell it today you would lose (7.00) from holding Geodrill Limited or give up 3.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Geodrill Limited  vs.  Winsome Resources Limited

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. Despite nearly stable fundamental indicators, Geodrill is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Winsome Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Winsome Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Geodrill and Winsome Resources

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

The idea behind Geodrill Limited and Winsome Resources Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.