Correlation Between Guru Organic and Cerrado Gold

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

By analyzing existing cross correlation between Guru Organic Energy and Cerrado Gold Corp, you can compare the effects of market volatilities on Guru Organic and Cerrado Gold 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 Guru Organic with a short position of Cerrado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guru Organic and Cerrado Gold.

Diversification Opportunities for Guru Organic and Cerrado Gold

-0.01

Correlation Coefficient

Guru Organic  Cerrado Gold

Good diversification

The 3 months correlation between Guru and Cerrado is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Guru Organic Energy and Cerrado Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerrado Gold Corp and Guru Organic 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 Guru Organic Energy are associated (or correlated) with Cerrado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerrado Gold Corp has no effect on the direction of Guru Organic i.e., Guru Organic and Cerrado Gold go up and down completely randomly.

Pair Corralation between Guru Organic and Cerrado Gold

Assuming the 90 days trading horizon Guru Organic is expected to generate 1.01 times less return on investment than Cerrado Gold. But when comparing it to its historical volatility, Guru Organic Energy is 1.25 times less risky than Cerrado Gold. It trades about 0.18 of its potential returns per unit of risk. Cerrado Gold Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Cerrado Gold Corp on December 21, 2024 and sell it today you would earn a total of  16.00  from holding Cerrado Gold Corp or generate 48.48% return on investment over 90 days.

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

Guru Organic Energy  vs.  Cerrado Gold Corp

Guru Organic Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guru Organic Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guru Organic displayed solid returns over the last few months and may actually be approaching a breakup point.

Cerrado Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cerrado Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cerrado Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guru Organic and Cerrado Gold

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

The idea behind Guru Organic Energy and Cerrado Gold Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.