Correlation Between Gold Road and Southern Cross

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

Diversification Opportunities for Gold Road and Southern Cross

0.71

Correlation Coefficient

Gold Road  Southern Cross

Poor diversification

The 3 months correlation between Gold and Southern is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Southern Cross Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Cross Gold 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 Southern Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Cross Gold has no effect on the direction of Gold Road i.e., Gold Road and Southern Cross go up and down completely randomly.

Pair Corralation between Gold Road and Southern Cross

Assuming the 90 days trading horizon Gold Road Resources is expected to under-perform the Southern Cross. But the stock apears to be less risky and, when comparing its historical volatility, Gold Road Resources is 3.55 times less risky than Southern Cross. The stock trades about -0.08 of its potential returns per unit of risk. The Southern Cross Gold is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Southern Cross Gold on October 11, 2024 and sell it today you would earn a total of  24.00  from holding Southern Cross Gold or generate 6.92% 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.  Southern Cross Gold

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.

Southern Cross Gold

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Gold Road and Southern Cross

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

The idea behind Gold Road Resources and Southern Cross Gold 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.