Correlation Between Macmahon Holdings and Golden Lake

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

By analyzing existing cross correlation between Macmahon Holdings Limited and Golden Lake Exploration, you can compare the effects of market volatilities on Macmahon Holdings and Golden Lake 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 Macmahon Holdings with a short position of Golden Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macmahon Holdings and Golden Lake.

Diversification Opportunities for Macmahon Holdings and Golden Lake

-0.28

Correlation Coefficient

Macmahon Holdings  Golden Lake

Very good diversification

The 3 months correlation between Macmahon and Golden is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Macmahon Holdings Limited and Golden Lake Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Lake Exploration and Macmahon Holdings 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 Macmahon Holdings Limited are associated (or correlated) with Golden Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Lake Exploration has no effect on the direction of Macmahon Holdings i.e., Macmahon Holdings and Golden Lake go up and down completely randomly.

Pair Corralation between Macmahon Holdings and Golden Lake

Assuming the 90 days horizon Macmahon Holdings Limited is expected to generate 0.45 times more return on investment than Golden Lake. However, Macmahon Holdings Limited is 2.2 times less risky than Golden Lake. It trades about 0.12 of its potential returns per unit of risk. Golden Lake Exploration is currently generating about -0.09 per unit of risk. If you would invest  19.00  in Macmahon Holdings Limited on September 15, 2024 and sell it today you would earn a total of  6.00  from holding Macmahon Holdings Limited or generate 31.58% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  Golden Lake Exploration

Macmahon Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Golden Lake Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Lake Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Macmahon Holdings and Golden Lake

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

The idea behind Macmahon Holdings Limited and Golden Lake Exploration 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.