Correlation Between Golden Metal and LBG Media

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

Diversification Opportunities for Golden Metal and LBG Media

-0.56

Correlation Coefficient

Golden Metal  LBG Media

Excellent diversification

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

Pair Corralation between Golden Metal and LBG Media

Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 1.18 times more return on investment than LBG Media. However, Golden Metal is 1.18 times more volatile than LBG Media PLC. It trades about 0.16 of its potential returns per unit of risk. LBG Media PLC is currently generating about -0.13 per unit of risk. If you would invest  2,800  in Golden Metal Resources on December 20, 2024 and sell it today you would earn a total of  850.00  from holding Golden Metal Resources or generate 30.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Golden Metal Resources  vs.  LBG Media PLC

Golden Metal Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Metal Resources are ranked lower than 12 (%) 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.

LBG Media PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Golden Metal and LBG Media

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

The idea behind Golden Metal Resources and LBG Media PLC 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.