Correlation Between Talga Group and Gensource Potash

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

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

Diversification Opportunities for Talga Group and Gensource Potash

-0.39

Correlation Coefficient

Talga Group  Gensource Potash

Very good diversification

The 3 months correlation between Talga and Gensource is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Talga Group and Gensource Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gensource Potash and Talga Group 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 Talga Group are associated (or correlated) with Gensource Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gensource Potash has no effect on the direction of Talga Group i.e., Talga Group and Gensource Potash go up and down completely randomly.

Pair Corralation between Talga Group and Gensource Potash

Assuming the 90 days horizon Talga Group is expected to under-perform the Gensource Potash. But the pink sheet apears to be less risky and, when comparing its historical volatility, Talga Group is 8.56 times less risky than Gensource Potash. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Gensource Potash is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Gensource Potash on September 4, 2024 and sell it today you would lose (6.00) from holding Gensource Potash or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Talga Group  vs.  Gensource Potash

Talga Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga Group reported solid returns over the last few months and may actually be approaching a breakup point.

Gensource Potash

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gensource Potash are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Gensource Potash reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talga Group and Gensource Potash

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

The idea behind Talga Group and Gensource Potash 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.