Correlation Between Golden Metal and Porvair Plc

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

Diversification Opportunities for Golden Metal and Porvair Plc

-0.3

Correlation Coefficient

Golden Metal  Porvair Plc

Very good diversification

The 3 months correlation between Golden and Porvair is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Golden Metal i.e., Golden Metal and Porvair Plc go up and down completely randomly.

Pair Corralation between Golden Metal and Porvair Plc

Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 2.51 times more return on investment than Porvair Plc. However, Golden Metal is 2.51 times more volatile than Porvair plc. It trades about 0.03 of its potential returns per unit of risk. Porvair plc is currently generating about 0.06 per unit of risk. If you would invest  2,900  in Golden Metal Resources on September 13, 2024 and sell it today you would earn a total of  50.00  from holding Golden Metal Resources or generate 1.72% return on investment over 90 days.

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

Golden Metal Resources  vs.  Porvair plc

Golden Metal Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Metal Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Golden Metal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Porvair plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Porvair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Golden Metal and Porvair Plc

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

The idea behind Golden Metal Resources and Porvair 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.