Correlation Between Golden Metal and Alphabet

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

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

Diversification Opportunities for Golden Metal and Alphabet

0.11

Correlation Coefficient

Golden Metal  Alphabet

Average diversification

The 3 months correlation between Golden and Alphabet is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and Golden Metal 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 Metal Resources are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Golden Metal i.e., Golden Metal and Alphabet go up and down completely randomly.

Pair Corralation between Golden Metal and Alphabet

Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 25.39 times more return on investment than Alphabet. However, Golden Metal is 25.39 times more volatile than Alphabet Class A. It trades about 0.06 of its potential returns per unit of risk. Alphabet Class A is currently generating about 0.08 per unit of risk. If you would invest  9.00  in Golden Metal Resources on October 15, 2024 and sell it today you would earn a total of  3,141  from holding Golden Metal Resources or generate 34900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.94%
Values	Daily Returns

Golden Metal Resources  vs.  Alphabet Class A

Golden Metal Resources

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Metal Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Golden Metal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alphabet Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alphabet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Metal and Alphabet

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

The idea behind Golden Metal Resources and Alphabet Class A 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.