Correlation Between Gold Bond and Overseas Commerce

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

By analyzing existing cross correlation between The Gold Bond and Overseas Commerce, you can compare the effects of market volatilities on Gold Bond and Overseas Commerce 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 Gold Bond with a short position of Overseas Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Bond and Overseas Commerce.

Diversification Opportunities for Gold Bond and Overseas Commerce

0.78

Correlation Coefficient

Gold Bond  Overseas Commerce

Poor diversification

The 3 months correlation between Gold and Overseas is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bond and Overseas Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overseas Commerce and Gold Bond 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 The Gold Bond are associated (or correlated) with Overseas Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overseas Commerce has no effect on the direction of Gold Bond i.e., Gold Bond and Overseas Commerce go up and down completely randomly.

Pair Corralation between Gold Bond and Overseas Commerce

Assuming the 90 days trading horizon Gold Bond is expected to generate 1.87 times less return on investment than Overseas Commerce. In addition to that, Gold Bond is 1.05 times more volatile than Overseas Commerce. It trades about 0.06 of its total potential returns per unit of risk. Overseas Commerce is currently generating about 0.12 per unit of volatility. If you would invest  34,876  in Overseas Commerce on September 3, 2024 and sell it today you would earn a total of  3,304  from holding Overseas Commerce or generate 9.47% return on investment over 90 days.

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

The Gold Bond  vs.  Overseas Commerce

Gold Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bond may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Overseas Commerce

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Overseas Commerce are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Overseas Commerce sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Bond and Overseas Commerce

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

The idea behind The Gold Bond and Overseas Commerce 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.