Correlation Between Gold Road and British American
Can any of the company-specific risk be diversified away by investing in both Gold Road and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Road Resources and British American Tobacco, you can compare the effects of market volatilities on Gold Road and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and British American.
Diversification Opportunities for Gold Road and British American
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gold and British is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 Resources are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Gold Road i.e., Gold Road and British American go up and down completely randomly.
Pair Corralation between Gold Road and British American
Assuming the 90 days horizon Gold Road Resources is expected to generate 2.49 times more return on investment than British American. However, Gold Road is 2.49 times more volatile than British American Tobacco. It trades about 0.02 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.02 per unit of risk. If you would invest 114.00 in Gold Road Resources on September 26, 2024 and sell it today you would earn a total of 6.00 from holding Gold Road Resources or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. British American Tobacco
Performance |
| Timeline |
| Gold Road Resources |
| British American Tobacco |
Gold Road and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and British American
The main advantage of trading using opposite Gold Road and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Gold Road vs. ZIJIN MINH UNSPADR20 | Gold Road vs. Newmont | Gold Road vs. Barrick Gold | Gold Road vs. Franco Nevada |
| British American vs. Ping An Insurance | British American vs. Direct Line Insurance | British American vs. ZURICH INSURANCE GROUP | British American vs. Gold Road Resources |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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