Correlation Between Gold Fields and Pan African

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

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

Diversification Opportunities for Gold Fields and Pan African

0.53

Correlation Coefficient

Gold Fields  Pan African

Very weak diversification

The 3 months correlation between Gold and Pan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources 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 are associated (or correlated) with Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of Gold Fields i.e., Gold Fields and Pan African go up and down completely randomly.

Pair Corralation between Gold Fields and Pan African

Assuming the 90 days trading horizon Gold Fields is expected to generate 2.24 times less return on investment than Pan African. In addition to that, Gold Fields is 1.07 times more volatile than Pan African Resources. It trades about 0.03 of its total potential returns per unit of risk. Pan African Resources is currently generating about 0.08 per unit of volatility. If you would invest  77,000  in Pan African Resources on September 14, 2024 and sell it today you would earn a total of  8,800  from holding Pan African Resources or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Gold Fields  vs.  Pan African Resources

Gold Fields

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Gold Fields is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pan African Resources

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan African Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pan African may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gold Fields and Pan African

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

The idea behind Gold Fields and Pan African Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.