Correlation Between Gold Road and Pro Medicus

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

Diversification Opportunities for Gold Road and Pro Medicus

0.75

Correlation Coefficient

Gold Road  Pro Medicus

Poor diversification

The 3 months correlation between Gold and Pro is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Pro Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Medicus 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 Pro Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Medicus has no effect on the direction of Gold Road i.e., Gold Road and Pro Medicus go up and down completely randomly.

Pair Corralation between Gold Road and Pro Medicus

Assuming the 90 days trading horizon Gold Road is expected to generate 3.7 times less return on investment than Pro Medicus. In addition to that, Gold Road is 1.09 times more volatile than Pro Medicus. It trades about 0.04 of its total potential returns per unit of risk. Pro Medicus is currently generating about 0.18 per unit of volatility. If you would invest  9,396  in Pro Medicus on October 7, 2024 and sell it today you would earn a total of  15,943  from holding Pro Medicus or generate 169.68% 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.  Pro Medicus

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.

Pro Medicus

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Pro Medicus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and Pro Medicus

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

The idea behind Gold Road Resources and Pro Medicus 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.