Correlation Between Hexcel and Gold Road
Can any of the company-specific risk be diversified away by investing in both Hexcel and Gold Road 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 Hexcel and Gold Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hexcel and Gold Road Resources, you can compare the effects of market volatilities on Hexcel and Gold Road 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 Hexcel with a short position of Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hexcel and Gold Road.
Diversification Opportunities for Hexcel and Gold Road
Poor diversification
The 3 months correlation between Hexcel and Gold is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources and Hexcel 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 Hexcel are associated (or correlated) with Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of Hexcel i.e., Hexcel and Gold Road go up and down completely randomly.
Pair Corralation between Hexcel and Gold Road
Assuming the 90 days horizon Hexcel is expected to generate 1.81 times less return on investment than Gold Road. But when comparing it to its historical volatility, Hexcel is 1.6 times less risky than Gold Road. It trades about 0.02 of its potential returns per unit of risk. Gold Road Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 101.00 in Gold Road Resources on September 5, 2024 and sell it today you would earn a total of 21.00 from holding Gold Road Resources or generate 20.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hexcel vs. Gold Road Resources
Performance |
| Timeline |
| Hexcel |
| Gold Road Resources |
Hexcel and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hexcel and Gold Road
The main advantage of trading using opposite Hexcel and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexcel position performs unexpectedly, Gold Road 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 Gold Road will offset losses from the drop in Gold Road's long position.The idea behind Hexcel and Gold Road Resources 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.| Gold Road vs. Superior Plus Corp | Gold Road vs. NMI Holdings | Gold Road vs. Origin Agritech | Gold Road vs. SIVERS SEMICONDUCTORS AB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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