Correlation Between Gold Fields and Alkane Resources

Can any of the company-specific risk be diversified away by investing in both Gold Fields and Alkane 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 Gold Fields and Alkane Resources 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 Alkane Resources Limited, you can compare the effects of market volatilities on Gold Fields and Alkane 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 Gold Fields with a short position of Alkane Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Alkane Resources.

Diversification Opportunities for Gold Fields and Alkane Resources

0.61

Correlation Coefficient

Gold Fields  Alkane Resources

Poor diversification

The 3 months correlation between Gold and Alkane is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Alkane Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkane 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 Ltd are associated (or correlated) with Alkane Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkane Resources has no effect on the direction of Gold Fields i.e., Gold Fields and Alkane Resources go up and down completely randomly.

Pair Corralation between Gold Fields and Alkane Resources

Considering the 90-day investment horizon Gold Fields is expected to generate 4.55 times less return on investment than Alkane Resources. But when comparing it to its historical volatility, Gold Fields Ltd is 2.97 times less risky than Alkane Resources. It trades about 0.04 of its potential returns per unit of risk. Alkane Resources Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Alkane Resources Limited on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Alkane Resources Limited or generate 14.29% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Alkane Resources Limited

Gold Fields

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alkane Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alkane Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Alkane Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and Alkane Resources

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

The idea behind Gold Fields Ltd and Alkane 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 Transaction History module to view history of all your transactions and understand their impact on performance.