Correlation Between Gold Road and G8 Education

Can any of the company-specific risk be diversified away by investing in both Gold Road and G8 Education 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 G8 Education 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 G8 Education, you can compare the effects of market volatilities on Gold Road and G8 Education 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 G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and G8 Education.

Diversification Opportunities for Gold Road and G8 Education

0.47

Correlation Coefficient

Gold Road  G8 Education

Very weak diversification

The 3 months correlation between Gold and GEM is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education 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 G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Gold Road i.e., Gold Road and G8 Education go up and down completely randomly.

Pair Corralation between Gold Road and G8 Education

Assuming the 90 days trading horizon Gold Road Resources is expected to generate 1.65 times more return on investment than G8 Education. However, Gold Road is 1.65 times more volatile than G8 Education. It trades about 0.24 of its potential returns per unit of risk. G8 Education is currently generating about 0.02 per unit of risk. If you would invest  204.00  in Gold Road Resources on December 28, 2024 and sell it today you would earn a total of  89.00  from holding Gold Road Resources or generate 43.63% return on investment over 90 days.

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

Gold Road Resources  vs.  G8 Education

Gold Road Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 18 (%) 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.

G8 Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in G8 Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, G8 Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gold Road and G8 Education

The main advantage of trading using opposite Gold Road and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education's long position.

The idea behind Gold Road Resources and G8 Education 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.