Correlation Between Gold Fields and Extreme Networks
Can any of the company-specific risk be diversified away by investing in both Gold Fields and Extreme Networks 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 Fields and Extreme Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and Extreme Networks, you can compare the effects of market volatilities on Gold Fields and Extreme Networks 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 Fields with a short position of Extreme Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Extreme Networks.
Diversification Opportunities for Gold Fields and Extreme Networks
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gold and Extreme is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Extreme Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extreme Networks and Gold Fields 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 Fields Ltd are associated (or correlated) with Extreme Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extreme Networks has no effect on the direction of Gold Fields i.e., Gold Fields and Extreme Networks go up and down completely randomly.
Pair Corralation between Gold Fields and Extreme Networks
Considering the 90-day investment horizon Gold Fields Ltd is expected to under-perform the Extreme Networks. But the stock apears to be less risky and, when comparing its historical volatility, Gold Fields Ltd is 1.22 times less risky than Extreme Networks. The stock trades about -0.23 of its potential returns per unit of risk. The Extreme Networks is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,425 in Extreme Networks on August 28, 2024 and sell it today you would earn a total of 224.00 from holding Extreme Networks or generate 15.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. Extreme Networks
Performance |
| Timeline |
| Gold Fields |
| Extreme Networks |
Gold Fields and Extreme Networks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and Extreme Networks
The main advantage of trading using opposite Gold Fields and Extreme Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields position performs unexpectedly, Extreme Networks 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 Extreme Networks will offset losses from the drop in Extreme Networks' long position.| Gold Fields vs. Agnico Eagle Mines | Gold Fields vs. Kinross Gold | Gold Fields vs. Harmony Gold Mining | Gold Fields vs. Franco Nevada |
| Extreme Networks vs. Knowles Cor | Extreme Networks vs. KVH Industries | Extreme Networks vs. Comtech Telecommunications Corp | Extreme Networks vs. EchoStar |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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