Correlation Between Gold Fields and North Dallas

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

Diversification Opportunities for Gold Fields and North Dallas

-0.56

Correlation Coefficient

Gold Fields  North Dallas

Excellent diversification

The 3 months correlation between Gold and North is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and North Dallas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Dallas Bank 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 North Dallas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Dallas Bank has no effect on the direction of Gold Fields i.e., Gold Fields and North Dallas go up and down completely randomly.

Pair Corralation between Gold Fields and North Dallas

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 2.04 times more return on investment than North Dallas. However, Gold Fields is 2.04 times more volatile than North Dallas Bank. It trades about 0.03 of its potential returns per unit of risk. North Dallas Bank is currently generating about -0.07 per unit of risk. If you would invest  1,141  in Gold Fields Ltd on October 5, 2024 and sell it today you would earn a total of  265.00  from holding Gold Fields Ltd or generate 23.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.24%
Values	Daily Returns

Gold Fields Ltd  vs.  North Dallas Bank

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 unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

North Dallas Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North Dallas Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, North Dallas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gold Fields and North Dallas

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

The idea behind Gold Fields Ltd and North Dallas Bank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.