Correlation Between Puma Exploration and Goldshore Resources

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

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

Diversification Opportunities for Puma Exploration and Goldshore Resources

-0.22

Correlation Coefficient

Puma Exploration  Goldshore Resources

Very good diversification

The 3 months correlation between Puma and Goldshore is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Puma Exploration and Goldshore Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldshore Resources and Puma Exploration 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 Puma Exploration are associated (or correlated) with Goldshore Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldshore Resources has no effect on the direction of Puma Exploration i.e., Puma Exploration and Goldshore Resources go up and down completely randomly.

Pair Corralation between Puma Exploration and Goldshore Resources

Assuming the 90 days horizon Puma Exploration is expected to generate 1.17 times more return on investment than Goldshore Resources. However, Puma Exploration is 1.17 times more volatile than Goldshore Resources. It trades about 0.12 of its potential returns per unit of risk. Goldshore Resources is currently generating about -0.02 per unit of risk. If you would invest  4.00  in Puma Exploration on September 3, 2024 and sell it today you would earn a total of  2.00  from holding Puma Exploration or generate 50.0% return on investment over 90 days.

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

Puma Exploration  vs.  Goldshore Resources

Puma Exploration

Risk-Adjusted Performance

9 of 100

OK

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

Goldshore Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Puma Exploration and Goldshore Resources

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

The idea behind Puma Exploration and Goldshore 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.