Correlation Between VIVA WINE and Gossan Resources

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

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

Diversification Opportunities for VIVA WINE and Gossan Resources

0.4

Correlation Coefficient

VIVA WINE  Gossan Resources

Very weak diversification

The 3 months correlation between VIVA and Gossan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding VIVA WINE GROUP and Gossan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossan Resources and VIVA WINE 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 VIVA WINE GROUP are associated (or correlated) with Gossan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossan Resources has no effect on the direction of VIVA WINE i.e., VIVA WINE and Gossan Resources go up and down completely randomly.

Pair Corralation between VIVA WINE and Gossan Resources

Assuming the 90 days horizon VIVA WINE is expected to generate 46.01 times less return on investment than Gossan Resources. But when comparing it to its historical volatility, VIVA WINE GROUP is 31.56 times less risky than Gossan Resources. It trades about 0.14 of its potential returns per unit of risk. Gossan Resources is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Gossan Resources on December 20, 2024 and sell it today you would earn a total of  0.60  from holding Gossan Resources or generate 120.0% return on investment over 90 days.

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

VIVA WINE GROUP  vs.  Gossan Resources

VIVA WINE GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VIVA WINE GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VIVA WINE reported solid returns over the last few months and may actually be approaching a breakup point.

Gossan Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gossan Resources are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gossan Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VIVA WINE and Gossan Resources

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

The idea behind VIVA WINE GROUP and Gossan 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.