Correlation Between TeraGo and Outback Goldfields

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

By analyzing existing cross correlation between TeraGo Inc and Outback Goldfields Corp, you can compare the effects of market volatilities on TeraGo and Outback Goldfields 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 TeraGo with a short position of Outback Goldfields. Check out your portfolio center. Please also check ongoing floating volatility patterns of TeraGo and Outback Goldfields.

Diversification Opportunities for TeraGo and Outback Goldfields

0.55

Correlation Coefficient

TeraGo  Outback Goldfields

Very weak diversification

The 3 months correlation between TeraGo and Outback is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding TeraGo Inc and Outback Goldfields Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outback Goldfields Corp and TeraGo 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 TeraGo Inc are associated (or correlated) with Outback Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outback Goldfields Corp has no effect on the direction of TeraGo i.e., TeraGo and Outback Goldfields go up and down completely randomly.

Pair Corralation between TeraGo and Outback Goldfields

Assuming the 90 days trading horizon TeraGo Inc is expected to under-perform the Outback Goldfields. But the stock apears to be less risky and, when comparing its historical volatility, TeraGo Inc is 1.78 times less risky than Outback Goldfields. The stock trades about -0.04 of its potential returns per unit of risk. The Outback Goldfields Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Outback Goldfields Corp on December 20, 2024 and sell it today you would earn a total of  7.00  from holding Outback Goldfields Corp or generate 21.21% return on investment over 90 days.

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

TeraGo Inc  vs.  Outback Goldfields Corp

TeraGo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days TeraGo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Outback Goldfields Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Outback Goldfields Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Outback Goldfields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TeraGo and Outback Goldfields

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

The idea behind TeraGo Inc and Outback Goldfields Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.