Correlation Between Galway Metals and Teuton Resources

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

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

Diversification Opportunities for Galway Metals and Teuton Resources

0.67

Correlation Coefficient

Galway Metals  Teuton Resources

Poor diversification

The 3 months correlation between Galway and Teuton is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Galway Metals and Teuton Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teuton Resources Corp and Galway Metals 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 Galway Metals are associated (or correlated) with Teuton Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teuton Resources Corp has no effect on the direction of Galway Metals i.e., Galway Metals and Teuton Resources go up and down completely randomly.

Pair Corralation between Galway Metals and Teuton Resources

Assuming the 90 days horizon Galway Metals is expected to under-perform the Teuton Resources. In addition to that, Galway Metals is 1.48 times more volatile than Teuton Resources Corp. It trades about -0.04 of its total potential returns per unit of risk. Teuton Resources Corp is currently generating about -0.05 per unit of volatility. If you would invest  95.00  in Teuton Resources Corp on December 29, 2024 and sell it today you would lose (12.00) from holding Teuton Resources Corp or give up 12.63% of portfolio value over 90 days.

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

Galway Metals  vs.  Teuton Resources Corp

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.

Teuton Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teuton Resources Corp 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 Galway Metals and Teuton Resources

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

The idea behind Galway Metals and Teuton Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.