Correlation Between Golden Goliath and Leading Edge

Can any of the company-specific risk be diversified away by investing in both Golden Goliath and Leading Edge 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 Golden Goliath and Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Golden Goliath and Leading Edge

0.46

Correlation Coefficient

Golden Goliath  Leading Edge

Very weak diversification

The 3 months correlation between Golden and Leading is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Golden Goliath Resources and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Golden Goliath 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 Golden Goliath Resources are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Golden Goliath i.e., Golden Goliath and Leading Edge go up and down completely randomly.

Pair Corralation between Golden Goliath and Leading Edge

Assuming the 90 days horizon Golden Goliath Resources is expected to generate 12.03 times more return on investment than Leading Edge. However, Golden Goliath is 12.03 times more volatile than Leading Edge Materials. It trades about 0.2 of its potential returns per unit of risk. Leading Edge Materials is currently generating about 0.0 per unit of risk. If you would invest  6.26  in Golden Goliath Resources on September 4, 2024 and sell it today you would earn a total of  1.24  from holding Golden Goliath Resources or generate 19.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.71%
Values	Daily Returns

Golden Goliath Resources  vs.  Leading Edge Materials

Golden Goliath Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Goliath Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Golden Goliath reported solid returns over the last few months and may actually be approaching a breakup point.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Golden Goliath and Leading Edge

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

The idea behind Golden Goliath Resources and Leading Edge Materials 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.