Correlation Between Golden Metal and Future Metals
Can any of the company-specific risk be diversified away by investing in both Golden Metal and Future Metals 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 Golden Metal and Future Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Metal Resources and Future Metals NL, you can compare the effects of market volatilities on Golden Metal and Future Metals 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 Golden Metal with a short position of Future Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Metal and Future Metals.
Diversification Opportunities for Golden Metal and Future Metals
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Golden and Future is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL and Golden Metal 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 Golden Metal Resources are associated (or correlated) with Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Golden Metal i.e., Golden Metal and Future Metals go up and down completely randomly.
Pair Corralation between Golden Metal and Future Metals
Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 1.48 times more return on investment than Future Metals. However, Golden Metal is 1.48 times more volatile than Future Metals NL. It trades about 0.16 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.36 per unit of risk. If you would invest 2,500 in Golden Metal Resources on September 12, 2024 and sell it today you would earn a total of 450.00 from holding Golden Metal Resources or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Golden Metal Resources vs. Future Metals NL
Performance |
| Timeline |
| Golden Metal Resources |
| Future Metals NL |
Golden Metal and Future Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Metal and Future Metals
The main advantage of trading using opposite Golden Metal and Future Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal position performs unexpectedly, Future Metals 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 Future Metals will offset losses from the drop in Future Metals' long position.| Golden Metal vs. Givaudan SA | Golden Metal vs. Antofagasta PLC | Golden Metal vs. Ferrexpo PLC | Golden Metal vs. Atalaya Mining |
| Future Metals vs. Givaudan SA | Future Metals vs. Antofagasta PLC | Future Metals vs. Ferrexpo PLC | Future Metals vs. Atalaya Mining |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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