Correlation Between GOLD ROAD and INDCOMMBK CHINA
Can any of the company-specific risk be diversified away by investing in both GOLD ROAD and INDCOMMBK CHINA 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 GOLD ROAD and INDCOMMBK CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOLD ROAD RES and INDCOMMBK CHINA ADR20, you can compare the effects of market volatilities on GOLD ROAD and INDCOMMBK CHINA 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 GOLD ROAD with a short position of INDCOMMBK CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and INDCOMMBK CHINA.
Diversification Opportunities for GOLD ROAD and INDCOMMBK CHINA
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GOLD and INDCOMMBK is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and INDCOMMBK CHINA ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDCOMMBK CHINA ADR20 and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with INDCOMMBK CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDCOMMBK CHINA ADR20 has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and INDCOMMBK CHINA go up and down completely randomly.
Pair Corralation between GOLD ROAD and INDCOMMBK CHINA
Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.14 times more return on investment than INDCOMMBK CHINA. However, GOLD ROAD is 1.14 times more volatile than INDCOMMBK CHINA ADR20. It trades about 0.27 of its potential returns per unit of risk. INDCOMMBK CHINA ADR20 is currently generating about 0.07 per unit of risk. If you would invest 106.00 in GOLD ROAD RES on September 19, 2024 and sell it today you would earn a total of 20.00 from holding GOLD ROAD RES or generate 18.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOLD ROAD RES vs. INDCOMMBK CHINA ADR20
Performance |
| Timeline |
| GOLD ROAD RES |
| INDCOMMBK CHINA ADR20 |
GOLD ROAD and INDCOMMBK CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOLD ROAD and INDCOMMBK CHINA
The main advantage of trading using opposite GOLD ROAD and INDCOMMBK CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD position performs unexpectedly, INDCOMMBK CHINA 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 INDCOMMBK CHINA will offset losses from the drop in INDCOMMBK CHINA's long position.The idea behind GOLD ROAD RES and INDCOMMBK CHINA ADR20 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.| INDCOMMBK CHINA vs. Gaztransport Technigaz SA | INDCOMMBK CHINA vs. Commonwealth Bank of | INDCOMMBK CHINA vs. Ameriprise Financial | INDCOMMBK CHINA vs. GOLD ROAD RES |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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