Correlation Between Gold Fields and Olin
Can any of the company-specific risk be diversified away by investing in both Gold Fields and Olin 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 Olin 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 Olin Corporation, you can compare the effects of market volatilities on Gold Fields and Olin 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 Olin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Olin.
Diversification Opportunities for Gold Fields and Olin
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gold and Olin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Olin Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olin 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 Olin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olin has no effect on the direction of Gold Fields i.e., Gold Fields and Olin go up and down completely randomly.
Pair Corralation between Gold Fields and Olin
Considering the 90-day investment horizon Gold Fields Ltd is expected to under-perform the Olin. In addition to that, Gold Fields is 1.65 times more volatile than Olin Corporation. It trades about -0.22 of its total potential returns per unit of risk. Olin Corporation is currently generating about 0.13 per unit of volatility. If you would invest 4,152 in Olin Corporation on August 28, 2024 and sell it today you would earn a total of 207.00 from holding Olin Corporation or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. Olin Corp.
Performance |
| Timeline |
| Gold Fields |
| Olin |
Gold Fields and Olin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and Olin
The main advantage of trading using opposite Gold Fields and Olin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields position performs unexpectedly, Olin 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 Olin will offset losses from the drop in Olin's long position.The idea behind Gold Fields Ltd and Olin Corporation 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.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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