Correlation Between Gold Road and CSL
Can any of the company-specific risk be diversified away by investing in both Gold Road and CSL 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 CSL 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 CSL Limited, you can compare the effects of market volatilities on Gold Road and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and CSL.
Diversification Opportunities for Gold Road and CSL
Very good diversification
The 3 months correlation between Gold and CSL is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of Gold Road i.e., Gold Road and CSL go up and down completely randomly.
Pair Corralation between Gold Road and CSL
Assuming the 90 days horizon Gold Road Resources is expected to generate 1.91 times more return on investment than CSL. However, Gold Road is 1.91 times more volatile than CSL Limited. It trades about 0.07 of its potential returns per unit of risk. CSL Limited is currently generating about 0.01 per unit of risk. If you would invest 101.00 in Gold Road Resources on September 5, 2024 and sell it today you would earn a total of 21.00 from holding Gold Road Resources or generate 20.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. CSL Limited
Performance |
| Timeline |
| Gold Road Resources |
| CSL Limited |
Gold Road and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and CSL
The main advantage of trading using opposite Gold Road and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Gold Road vs. Barrick Gold | Gold Road vs. Superior Plus Corp | Gold Road vs. NMI Holdings | Gold Road vs. Origin Agritech |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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