Correlation Between Pacific Ridge and Goliath Resources

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

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

Diversification Opportunities for Pacific Ridge and Goliath Resources

-0.63

Correlation Coefficient

Pacific Ridge  Goliath Resources

Excellent diversification

The 3 months correlation between Pacific and Goliath is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Ridge Exploration and Goliath Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goliath Resources and Pacific Ridge 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 Pacific Ridge Exploration are associated (or correlated) with Goliath Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goliath Resources has no effect on the direction of Pacific Ridge i.e., Pacific Ridge and Goliath Resources go up and down completely randomly.

Pair Corralation between Pacific Ridge and Goliath Resources

Assuming the 90 days horizon Pacific Ridge Exploration is expected to under-perform the Goliath Resources. In addition to that, Pacific Ridge is 1.28 times more volatile than Goliath Resources. It trades about -0.05 of its total potential returns per unit of risk. Goliath Resources is currently generating about 0.12 per unit of volatility. If you would invest  105.00  in Goliath Resources on December 5, 2024 and sell it today you would earn a total of  49.00  from holding Goliath Resources or generate 46.67% return on investment over 90 days.

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

Pacific Ridge Exploration  vs.  Goliath Resources

Pacific Ridge Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Ridge Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Goliath Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goliath Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Goliath Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Ridge and Goliath Resources

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

The idea behind Pacific Ridge Exploration and Goliath 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.