Correlation Between Socket Mobile and US GoldMining

Can any of the company-specific risk be diversified away by investing in both Socket Mobile and US GoldMining 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 Socket Mobile and US GoldMining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Socket Mobile and US GoldMining Warrant, you can compare the effects of market volatilities on Socket Mobile and US GoldMining 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 Socket Mobile with a short position of US GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Socket Mobile and US GoldMining.

Diversification Opportunities for Socket Mobile and US GoldMining

0.38

Correlation Coefficient

Socket Mobile  US GoldMining

Weak diversification

The 3 months correlation between Socket and USGOW is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Socket Mobile and US GoldMining Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US GoldMining Warrant and Socket Mobile 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 Socket Mobile are associated (or correlated) with US GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US GoldMining Warrant has no effect on the direction of Socket Mobile i.e., Socket Mobile and US GoldMining go up and down completely randomly.

Pair Corralation between Socket Mobile and US GoldMining

Given the investment horizon of 90 days Socket Mobile is expected to under-perform the US GoldMining. But the stock apears to be less risky and, when comparing its historical volatility, Socket Mobile is 3.05 times less risky than US GoldMining. The stock trades about -0.05 of its potential returns per unit of risk. The US GoldMining Warrant is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  151.00  in US GoldMining Warrant on December 28, 2024 and sell it today you would lose (27.00) from holding US GoldMining Warrant or give up 17.88% of portfolio value over 90 days.

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

Socket Mobile  vs.  US GoldMining Warrant

Socket Mobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Socket Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

US GoldMining Warrant

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US GoldMining Warrant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, US GoldMining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Socket Mobile and US GoldMining

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

The idea behind Socket Mobile and US GoldMining Warrant 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.