Correlation Between Grande Portage and Galway Metals

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

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

Diversification Opportunities for Grande Portage and Galway Metals

0.31

Correlation Coefficient

Grande Portage  Galway Metals

Weak diversification

The 3 months correlation between Grande and Galway is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Grande Portage Resources and Galway Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galway Metals and Grande Portage 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 Grande Portage Resources are associated (or correlated) with Galway Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galway Metals has no effect on the direction of Grande Portage i.e., Grande Portage and Galway Metals go up and down completely randomly.

Pair Corralation between Grande Portage and Galway Metals

Assuming the 90 days horizon Grande Portage Resources is expected to generate 1.09 times more return on investment than Galway Metals. However, Grande Portage is 1.09 times more volatile than Galway Metals. It trades about 0.01 of its potential returns per unit of risk. Galway Metals is currently generating about -0.04 per unit of risk. If you would invest  19.00  in Grande Portage Resources on December 29, 2024 and sell it today you would lose (1.00) from holding Grande Portage Resources or give up 5.26% of portfolio value over 90 days.

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

Grande Portage Resources  vs.  Galway Metals

Grande Portage Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grande Portage Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grande Portage is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Galway Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Galway Metals 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.

Pair Trading with Grande Portage and Galway Metals

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

The idea behind Grande Portage Resources and Galway 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.