Correlation Between Gold Road and Encounter Resources
Can any of the company-specific risk be diversified away by investing in both Gold Road and Encounter Resources 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 Encounter Resources 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 Encounter Resources, you can compare the effects of market volatilities on Gold Road and Encounter Resources 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 Encounter Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and Encounter Resources.
Diversification Opportunities for Gold Road and Encounter Resources
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gold and Encounter is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources 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 Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of Gold Road i.e., Gold Road and Encounter Resources go up and down completely randomly.
Pair Corralation between Gold Road and Encounter Resources
Assuming the 90 days trading horizon Gold Road is expected to generate 3.96 times less return on investment than Encounter Resources. But when comparing it to its historical volatility, Gold Road Resources is 2.62 times less risky than Encounter Resources. It trades about 0.03 of its potential returns per unit of risk. Encounter Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Encounter Resources on September 14, 2024 and sell it today you would earn a total of 16.00 from holding Encounter Resources or generate 88.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. Encounter Resources
Performance |
| Timeline |
| Gold Road Resources |
| Encounter Resources |
Gold Road and Encounter Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and Encounter Resources
The main advantage of trading using opposite Gold Road and Encounter Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, Encounter Resources 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 Encounter Resources will offset losses from the drop in Encounter Resources' long position.| Gold Road vs. Iron Road | Gold Road vs. MetalsGrove Mining | Gold Road vs. Dicker Data | Gold Road vs. Tombador Iron |
| Encounter Resources vs. Hutchison Telecommunications | Encounter Resources vs. Stelar Metals | Encounter Resources vs. Aurelia Metals | Encounter Resources 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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