Correlation Between United States and Gold Fields

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

By analyzing existing cross correlation between United States Steel and Gold Fields Ltd, you can compare the effects of market volatilities on United States and Gold Fields 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 United States with a short position of Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Gold Fields.

Diversification Opportunities for United States and Gold Fields

0.39

Correlation Coefficient

United States  Gold Fields

Weak diversification

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

Pair Corralation between United States and Gold Fields

Given the investment horizon of 90 days United States is expected to generate 1.33 times less return on investment than Gold Fields. But when comparing it to its historical volatility, United States Steel is 1.07 times less risky than Gold Fields. It trades about 0.25 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,580,000  in Gold Fields Ltd on December 27, 2024 and sell it today you would earn a total of  1,137,500  from holding Gold Fields Ltd or generate 71.99% return on investment over 90 days.

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

United States Steel  vs.  Gold Fields Ltd

United States Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Gold Fields

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Gold Fields sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Gold Fields

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

The idea behind United States Steel and Gold Fields Ltd 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..