Correlation Between GoGold Resources and Galway Metals

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

By analyzing existing cross correlation between GoGold Resources and Galway Metals, you can compare the effects of market volatilities on GoGold Resources and Galway Metals 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 GoGold Resources with a short position of Galway Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoGold Resources and Galway Metals.

Diversification Opportunities for GoGold Resources and Galway Metals

0.03

Correlation Coefficient

GoGold Resources  Galway Metals

Significant diversification

The 3 months correlation between GoGold and Galway is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding GoGold Resources and Galway Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galway Metals and GoGold Resources 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 GoGold Resources are associated (or correlated) with Galway Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galway Metals has no effect on the direction of GoGold Resources i.e., GoGold Resources and Galway Metals go up and down completely randomly.

Pair Corralation between GoGold Resources and Galway Metals

Assuming the 90 days trading horizon GoGold Resources is expected to generate 0.68 times more return on investment than Galway Metals. However, GoGold Resources is 1.46 times less risky than Galway Metals. It trades about 0.25 of its potential returns per unit of risk. Galway Metals is currently generating about -0.04 per unit of risk. If you would invest  106.00  in GoGold Resources on December 29, 2024 and sell it today you would earn a total of  70.00  from holding GoGold Resources or generate 66.04% return on investment over 90 days.

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

GoGold Resources  vs.  Galway Metals

GoGold Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GoGold Resources are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, GoGold Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Galway Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Galway Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with GoGold Resources and Galway Metals

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

The idea behind GoGold Resources and Galway Metals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.