Correlation Between Hannan Metals and Golden Arrow

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

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

Diversification Opportunities for Hannan Metals and Golden Arrow

0.39

Correlation Coefficient

Hannan Metals  Golden Arrow

Weak diversification

The 3 months correlation between Hannan and Golden is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hannan Metals and Golden Arrow Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Arrow Resources and Hannan 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 Hannan Metals are associated (or correlated) with Golden Arrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Arrow Resources has no effect on the direction of Hannan Metals i.e., Hannan Metals and Golden Arrow go up and down completely randomly.

Pair Corralation between Hannan Metals and Golden Arrow

Assuming the 90 days horizon Hannan Metals is expected to generate 1.04 times more return on investment than Golden Arrow. However, Hannan Metals is 1.04 times more volatile than Golden Arrow Resources. It trades about 0.17 of its potential returns per unit of risk. Golden Arrow Resources is currently generating about 0.13 per unit of risk. If you would invest  71.00  in Hannan Metals on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Hannan Metals or generate 76.06% return on investment over 90 days.

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

Hannan Metals  vs.  Golden Arrow Resources

Hannan Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hannan Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hannan Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Golden Arrow Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Arrow Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Golden Arrow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hannan Metals and Golden Arrow

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

The idea behind Hannan Metals and Golden Arrow Resources 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.