Correlation Between Gold Road and Red Hill
Can any of the company-specific risk be diversified away by investing in both Gold Road and Red Hill 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 Red Hill 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 Red Hill Iron, you can compare the effects of market volatilities on Gold Road and Red Hill 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 Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and Red Hill.
Diversification Opportunities for Gold Road and Red Hill
Poor diversification
The 3 months correlation between Gold and Red is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron 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 Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Gold Road i.e., Gold Road and Red Hill go up and down completely randomly.
Pair Corralation between Gold Road and Red Hill
Assuming the 90 days trading horizon Gold Road Resources is expected to generate 0.62 times more return on investment than Red Hill. However, Gold Road Resources is 1.61 times less risky than Red Hill. It trades about 0.06 of its potential returns per unit of risk. Red Hill Iron is currently generating about -0.03 per unit of risk. If you would invest 163.00 in Gold Road Resources on September 2, 2024 and sell it today you would earn a total of 24.00 from holding Gold Road Resources or generate 14.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. Red Hill Iron
Performance |
| Timeline |
| Gold Road Resources |
| Red Hill Iron |
Gold Road and Red Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and Red Hill
The main advantage of trading using opposite Gold Road and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, Red Hill 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 Red Hill will offset losses from the drop in Red Hill's long position.| Gold Road vs. Carlton Investments | Gold Road vs. Queste Communications | Gold Road vs. Flagship Investments | Gold Road vs. Qbe Insurance Group |
| Red Hill vs. Northern Star Resources | Red Hill vs. Evolution Mining | Red Hill vs. Bluescope Steel | Red Hill vs. Sandfire Resources NL |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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