Correlation Between Gold Fields and Silicom

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

Diversification Opportunities for Gold Fields and Silicom

-0.62

Correlation Coefficient

Gold Fields  Silicom

Excellent diversification

The 3 months correlation between Gold and Silicom is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Silicom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicom 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 Silicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicom has no effect on the direction of Gold Fields i.e., Gold Fields and Silicom go up and down completely randomly.

Pair Corralation between Gold Fields and Silicom

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 1.2 times more return on investment than Silicom. However, Gold Fields is 1.2 times more volatile than Silicom. It trades about 0.02 of its potential returns per unit of risk. Silicom is currently generating about 0.0 per unit of risk. If you would invest  1,372  in Gold Fields Ltd on October 5, 2024 and sell it today you would earn a total of  34.00  from holding Gold Fields Ltd or generate 2.48% 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.  Silicom

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.

Silicom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silicom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Silicom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Fields and Silicom

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

The idea behind Gold Fields Ltd and Silicom 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.