Correlation Between Golden Lake and Prime Meridian

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

Diversification Opportunities for Golden Lake and Prime Meridian

0.81

Correlation Coefficient

Golden Lake  Prime Meridian

Very poor diversification

The 3 months correlation between Golden and Prime is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Golden Lake Exploration and Prime Meridian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Meridian 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 Prime Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Meridian Resources has no effect on the direction of Golden Lake i.e., Golden Lake and Prime Meridian go up and down completely randomly.

Pair Corralation between Golden Lake and Prime Meridian

Assuming the 90 days horizon Golden Lake Exploration is expected to generate 1.18 times more return on investment than Prime Meridian. However, Golden Lake is 1.18 times more volatile than Prime Meridian Resources. It trades about 0.0 of its potential returns per unit of risk. Prime Meridian Resources is currently generating about -0.12 per unit of risk. If you would invest  4.35  in Golden Lake Exploration on October 11, 2024 and sell it today you would lose (0.95) from holding Golden Lake Exploration or give up 21.84% of portfolio value over 90 days.

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

Golden Lake Exploration  vs.  Prime Meridian 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.

Prime Meridian Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Meridian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Golden Lake and Prime Meridian

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

The idea behind Golden Lake Exploration and Prime Meridian 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.