Correlation Between Goliath Resources and CMC Metals

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

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

Diversification Opportunities for Goliath Resources and CMC Metals

0.66

Correlation Coefficient

Goliath Resources  CMC Metals

Poor diversification

The 3 months correlation between Goliath and CMC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Goliath Resources and CMC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Metals and Goliath Resources 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 Goliath Resources are associated (or correlated) with CMC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Metals has no effect on the direction of Goliath Resources i.e., Goliath Resources and CMC Metals go up and down completely randomly.

Pair Corralation between Goliath Resources and CMC Metals

Assuming the 90 days horizon Goliath Resources is expected to under-perform the CMC Metals. But the stock apears to be less risky and, when comparing its historical volatility, Goliath Resources is 6.28 times less risky than CMC Metals. The stock trades about -0.05 of its potential returns per unit of risk. The CMC Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.00  in CMC Metals on October 8, 2024 and sell it today you would earn a total of  0.00  from holding CMC Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Goliath Resources  vs.  CMC Metals

Goliath Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goliath Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

CMC Metals

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Goliath Resources and CMC Metals

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

The idea behind Goliath Resources and CMC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.