Correlation Between Australian United and Gold Road
Can any of the company-specific risk be diversified away by investing in both Australian United and Gold Road 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 Australian United and Gold Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian United Investment and Gold Road Resources, you can compare the effects of market volatilities on Australian United and Gold Road 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 Australian United with a short position of Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Gold Road.
Diversification Opportunities for Australian United and Gold Road
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Australian and Gold is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources and Australian United 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 Australian United Investment are associated (or correlated) with Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of Australian United i.e., Australian United and Gold Road go up and down completely randomly.
Pair Corralation between Australian United and Gold Road
Assuming the 90 days trading horizon Australian United is expected to generate 1.75 times less return on investment than Gold Road. But when comparing it to its historical volatility, Australian United Investment is 3.74 times less risky than Gold Road. It trades about 0.05 of its potential returns per unit of risk. Gold Road Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 167.00 in Gold Road Resources on September 3, 2024 and sell it today you would earn a total of 20.00 from holding Gold Road Resources or generate 11.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Gold Road Resources
Performance |
| Timeline |
| Australian United |
| Gold Road Resources |
Australian United and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Gold Road
The main advantage of trading using opposite Australian United and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Gold Road 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 Road will offset losses from the drop in Gold Road's long position.The idea behind Australian United Investment and Gold Road Resources 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.| Gold Road vs. Northern Star Resources | Gold Road vs. Evolution Mining | Gold Road vs. Bluescope Steel | Gold Road vs. Aneka Tambang Tbk |
Check out your portfolio center.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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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