Correlation Between NACCO Industries and GCM Resources

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

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

Diversification Opportunities for NACCO Industries and GCM Resources

-0.72

Correlation Coefficient

NACCO Industries  GCM Resources

Pay attention - limited upside

The 3 months correlation between NACCO and GCM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding NACCO Industries 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 NACCO Industries 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 NACCO Industries 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 NACCO Industries i.e., NACCO Industries and GCM Resources go up and down completely randomly.

Pair Corralation between NACCO Industries and GCM Resources

Allowing for the 90-day total investment horizon NACCO Industries is expected to generate 24.52 times less return on investment than GCM Resources. But when comparing it to its historical volatility, NACCO Industries is 44.89 times less risky than GCM Resources. It trades about 0.19 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 26, 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 Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

NACCO Industries  vs.  GCM Resources Plc

NACCO Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NACCO Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, NACCO Industries exhibited 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 unsteady primary indicators, GCM Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NACCO Industries and GCM Resources

The main advantage of trading using opposite NACCO Industries and GCM Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NACCO Industries 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 NACCO Industries 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.