Correlation Between Pilbara Minerals and Golden Goliath

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

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

Diversification Opportunities for Pilbara Minerals and Golden Goliath

0.02

Correlation Coefficient

Pilbara Minerals  Golden Goliath

Significant diversification

The 3 months correlation between Pilbara and Golden is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited and Golden Goliath Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Goliath Resources and Pilbara Minerals 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 Pilbara Minerals Limited are associated (or correlated) with Golden Goliath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Goliath Resources has no effect on the direction of Pilbara Minerals i.e., Pilbara Minerals and Golden Goliath go up and down completely randomly.

Pair Corralation between Pilbara Minerals and Golden Goliath

Assuming the 90 days horizon Pilbara Minerals Limited is expected to under-perform the Golden Goliath. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pilbara Minerals Limited is 18.88 times less risky than Golden Goliath. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Golden Goliath Resources is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Golden Goliath Resources on September 3, 2024 and sell it today you would lose (2.90) from holding Golden Goliath Resources or give up 32.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.13%
Values	Daily Returns

Pilbara Minerals Limited  vs.  Golden Goliath Resources

Pilbara Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Golden Goliath Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Goliath Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Golden Goliath reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pilbara Minerals and Golden Goliath

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

The idea behind Pilbara Minerals Limited and Golden 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.