Correlation Between Gold Road and Carawine Resources

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

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

Diversification Opportunities for Gold Road and Carawine Resources

-0.54

Correlation Coefficient

Gold Road  Carawine Resources

Excellent diversification

The 3 months correlation between Gold and Carawine is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources and Gold Road 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 Gold Road Resources are associated (or correlated) with Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Gold Road i.e., Gold Road and Carawine Resources go up and down completely randomly.

Pair Corralation between Gold Road and Carawine Resources

Assuming the 90 days trading horizon Gold Road Resources is expected to generate 0.66 times more return on investment than Carawine Resources. However, Gold Road Resources is 1.52 times less risky than Carawine Resources. It trades about 0.16 of its potential returns per unit of risk. Carawine Resources Limited is currently generating about 0.03 per unit of risk. If you would invest  198.00  in Gold Road Resources on October 23, 2024 and sell it today you would earn a total of  46.00  from holding Gold Road Resources or generate 23.23% return on investment over 90 days.

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

Gold Road Resources  vs.  Carawine Resources Limited

Gold Road Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gold Road unveiled solid returns over the last few months and may actually be approaching a breakup point.

Carawine Resources

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Gold Road and Carawine Resources

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

The idea behind Gold Road Resources and Carawine Resources Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.