Correlation Between Golden Goliath and American Creek

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

Diversification Opportunities for Golden Goliath and American Creek

0.47

Correlation Coefficient

Golden Goliath  American Creek

Very weak diversification

The 3 months correlation between Golden and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Golden Goliath Resources and American Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Creek Resources 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 American Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Creek Resources has no effect on the direction of Golden Goliath i.e., Golden Goliath and American Creek go up and down completely randomly.

Pair Corralation between Golden Goliath and American Creek

Assuming the 90 days horizon Golden Goliath Resources is expected to generate 3.39 times more return on investment than American Creek. However, Golden Goliath is 3.39 times more volatile than American Creek Resources. It trades about -0.02 of its potential returns per unit of risk. American Creek Resources is currently generating about -0.12 per unit of risk. If you would invest  5.00  in Golden Goliath Resources on October 22, 2024 and sell it today you would lose (2.00) from holding Golden Goliath Resources or give up 40.0% of portfolio value over 90 days.

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

Golden Goliath Resources  vs.  American Creek Resources

Golden Goliath Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Goliath Resources 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.

American Creek Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Creek Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, American Creek is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Golden Goliath and American Creek

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

The idea behind Golden Goliath Resources and American Creek Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.