Correlation Between Gold Fields and Compania

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

By analyzing existing cross correlation between Gold Fields Ltd and Compania de Transporte, you can compare the effects of market volatilities on Gold Fields and Compania 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 Gold Fields with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Compania.

Diversification Opportunities for Gold Fields and Compania

-0.69

Correlation Coefficient

Gold Fields  Compania

Excellent diversification

The 3 months correlation between Gold and Compania is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Gold Fields i.e., Gold Fields and Compania go up and down completely randomly.

Pair Corralation between Gold Fields and Compania

Assuming the 90 days trading horizon Gold Fields is expected to generate 3.01 times less return on investment than Compania. But when comparing it to its historical volatility, Gold Fields Ltd is 2.76 times less risky than Compania. It trades about 0.22 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  230,000  in Compania de Transporte on October 8, 2024 and sell it today you would earn a total of  53,000  from holding Compania de Transporte or generate 23.04% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Compania de Transporte

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Fields Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Compania de Transporte

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and Compania

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

The idea behind Gold Fields Ltd and Compania de Transporte 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.