Correlation Between Hallador Energy and GCM Resources

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

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

Diversification Opportunities for Hallador Energy and GCM Resources

0.06

Correlation Coefficient

Hallador Energy  GCM Resources

Significant diversification

The 3 months correlation between Hallador and GCM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hallador Energy and GCM Resources Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Resources Plc and Hallador Energy 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 Hallador Energy are associated (or correlated) with GCM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Resources Plc has no effect on the direction of Hallador Energy i.e., Hallador Energy and GCM Resources go up and down completely randomly.

Pair Corralation between Hallador Energy and GCM Resources

Given the investment horizon of 90 days Hallador Energy is expected to generate 18.26 times less return on investment than GCM Resources. But when comparing it to its historical volatility, Hallador Energy is 12.35 times less risky than GCM Resources. It trades about 0.07 of its potential returns per unit of risk. GCM Resources Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12.00  in GCM Resources Plc on December 25, 2024 and sell it today you would lose (6.00) from holding GCM Resources Plc or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Hallador Energy  vs.  GCM Resources Plc

Hallador Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hallador Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hallador Energy reported solid returns over the last few months and may actually be approaching a breakup point.

GCM Resources Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Resources Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, GCM Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hallador Energy and GCM Resources

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

The idea behind Hallador Energy and GCM Resources Plc 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.