Correlation Between Gold Road and Hastings Rare

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

Diversification Opportunities for Gold Road and Hastings Rare

0.7

Correlation Coefficient

Gold Road  Hastings Rare

Poor diversification

The 3 months correlation between Gold and Hastings is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Hastings Rare Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hastings Rare Metals 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 Hastings Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hastings Rare Metals has no effect on the direction of Gold Road i.e., Gold Road and Hastings Rare go up and down completely randomly.

Pair Corralation between Gold Road and Hastings Rare

Assuming the 90 days trading horizon Gold Road Resources is expected to under-perform the Hastings Rare. But the stock apears to be less risky and, when comparing its historical volatility, Gold Road Resources is 2.76 times less risky than Hastings Rare. The stock trades about -0.04 of its potential returns per unit of risk. The Hastings Rare Metals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Hastings Rare Metals on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Hastings Rare Metals or generate 3.03% return on investment over 90 days.

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

Gold Road Resources  vs.  Hastings Rare Metals

Gold Road Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 11 (%) 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.

Hastings Rare Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hastings Rare Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Hastings Rare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and Hastings Rare

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

The idea behind Gold Road Resources and Hastings Rare Metals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.