Correlation Between Gold Springs and Rio2

Can any of the company-specific risk be diversified away by investing in both Gold Springs and Rio2 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 Springs and Rio2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gold Springs Resource and Rio2 Limited, you can compare the effects of market volatilities on Gold Springs and Rio2 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 Springs with a short position of Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Springs and Rio2.

Diversification Opportunities for Gold Springs and Rio2

-0.16

Correlation Coefficient

Gold Springs  Rio2

Good diversification

The 3 months correlation between Gold and Rio2 is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gold Springs Resource and Rio2 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 Limited and Gold Springs 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 Springs Resource are associated (or correlated) with Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 Limited has no effect on the direction of Gold Springs i.e., Gold Springs and Rio2 go up and down completely randomly.

Pair Corralation between Gold Springs and Rio2

Assuming the 90 days horizon Gold Springs Resource is expected to under-perform the Rio2. In addition to that, Gold Springs is 2.25 times more volatile than Rio2 Limited. It trades about -0.02 of its total potential returns per unit of risk. Rio2 Limited is currently generating about 0.1 per unit of volatility. If you would invest  39.00  in Rio2 Limited on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Rio2 Limited or generate 17.95% return on investment over 90 days.

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

Gold Springs Resource  vs.  Rio2 Limited

Gold Springs Resource

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Gold Springs Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Rio2 Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Rio2 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Springs and Rio2

The main advantage of trading using opposite Gold Springs and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Springs position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.

The idea behind Gold Springs Resource and Rio2 Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.