Correlation Between Golden Lake and Bitterroot Resources

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

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

Diversification Opportunities for Golden Lake and Bitterroot Resources

-0.34

Correlation Coefficient

Golden Lake  Bitterroot Resources

Very good diversification

The 3 months correlation between Golden and Bitterroot is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Golden Lake Exploration and Bitterroot Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitterroot Resources and Golden Lake 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 Lake Exploration are associated (or correlated) with Bitterroot Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitterroot Resources has no effect on the direction of Golden Lake i.e., Golden Lake and Bitterroot Resources go up and down completely randomly.

Pair Corralation between Golden Lake and Bitterroot Resources

Assuming the 90 days horizon Golden Lake Exploration is expected to generate 0.34 times more return on investment than Bitterroot Resources. However, Golden Lake Exploration is 2.97 times less risky than Bitterroot Resources. It trades about 0.29 of its potential returns per unit of risk. Bitterroot Resources is currently generating about 0.08 per unit of risk. If you would invest  2.15  in Golden Lake Exploration on October 25, 2024 and sell it today you would earn a total of  0.95  from holding Golden Lake Exploration or generate 44.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Golden Lake Exploration  vs.  Bitterroot Resources

Golden Lake Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Lake Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Golden Lake is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bitterroot Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bitterroot Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bitterroot Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Lake and Bitterroot Resources

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

The idea behind Golden Lake Exploration and Bitterroot 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.