Correlation Between Mount Gibson and Global Data

Can any of the company-specific risk be diversified away by investing in both Mount Gibson and Global Data 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 Mount Gibson and Global Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mount Gibson Iron and Global Data Centre, you can compare the effects of market volatilities on Mount Gibson and Global Data 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 Mount Gibson with a short position of Global Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and Global Data.

Diversification Opportunities for Mount Gibson and Global Data

0.46

Correlation Coefficient

Mount Gibson  Global Data

Very weak diversification

The 3 months correlation between Mount and Global is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Global Data Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Data Centre and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Global Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Data Centre has no effect on the direction of Mount Gibson i.e., Mount Gibson and Global Data go up and down completely randomly.

Pair Corralation between Mount Gibson and Global Data

Assuming the 90 days trading horizon Mount Gibson Iron is expected to under-perform the Global Data. But the stock apears to be less risky and, when comparing its historical volatility, Mount Gibson Iron is 1.19 times less risky than Global Data. The stock trades about -0.02 of its potential returns per unit of risk. The Global Data Centre is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Global Data Centre on September 26, 2024 and sell it today you would earn a total of  65.00  from holding Global Data Centre or generate 83.33% return on investment over 90 days.

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

Mount Gibson Iron  vs.  Global Data Centre

Mount Gibson Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mount Gibson Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mount Gibson is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Global Data Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Data Centre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Mount Gibson and Global Data

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

The idea behind Mount Gibson Iron and Global Data Centre 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.