Correlation Between Thor Mining and Gear4music Plc

Can any of the company-specific risk be diversified away by investing in both Thor Mining and Gear4music Plc 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 Thor Mining and Gear4music Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thor Mining PLC and Gear4music Plc, you can compare the effects of market volatilities on Thor Mining and Gear4music Plc 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 Thor Mining with a short position of Gear4music Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thor Mining and Gear4music Plc.

Diversification Opportunities for Thor Mining and Gear4music Plc

0.02

Correlation Coefficient

Thor Mining  Gear4music Plc

Significant diversification

The 3 months correlation between Thor and Gear4music is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Thor Mining PLC and Gear4music Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear4music Plc and Thor Mining 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 Thor Mining PLC are associated (or correlated) with Gear4music Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear4music Plc has no effect on the direction of Thor Mining i.e., Thor Mining and Gear4music Plc go up and down completely randomly.

Pair Corralation between Thor Mining and Gear4music Plc

Assuming the 90 days trading horizon Thor Mining PLC is expected to under-perform the Gear4music Plc. In addition to that, Thor Mining is 2.19 times more volatile than Gear4music Plc. It trades about -0.04 of its total potential returns per unit of risk. Gear4music Plc is currently generating about -0.03 per unit of volatility. If you would invest  17,500  in Gear4music Plc on September 14, 2024 and sell it today you would lose (750.00) from holding Gear4music Plc or give up 4.29% of portfolio value over 90 days.

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

Thor Mining PLC  vs.  Gear4music Plc

Thor Mining PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Mining PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Gear4music Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Gear4music Plc is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Thor Mining and Gear4music Plc

The main advantage of trading using opposite Thor Mining and Gear4music Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thor Mining position performs unexpectedly, Gear4music Plc 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 Gear4music Plc will offset losses from the drop in Gear4music Plc's long position.

The idea behind Thor Mining PLC and Gear4music Plc 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.