Correlation Between Komatsu and Gold Road
Can any of the company-specific risk be diversified away by investing in both Komatsu 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 Komatsu and Gold Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Komatsu and Gold Road Resources, you can compare the effects of market volatilities on Komatsu 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 Komatsu with a short position of Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Komatsu and Gold Road.
Diversification Opportunities for Komatsu and Gold Road
Very weak diversification
The 3 months correlation between Komatsu and Gold is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu 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 Komatsu 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 Komatsu 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 Komatsu i.e., Komatsu and Gold Road go up and down completely randomly.
Pair Corralation between Komatsu and Gold Road
Assuming the 90 days trading horizon Komatsu is expected to under-perform the Gold Road. But the stock apears to be less risky and, when comparing its historical volatility, Komatsu is 1.8 times less risky than Gold Road. The stock trades about -0.16 of its potential returns per unit of risk. The Gold Road Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 149.00 in Gold Road Resources on January 5, 2025 and sell it today you would earn a total of 18.00 from holding Gold Road Resources or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Komatsu vs. Gold Road Resources
Performance |
| Timeline |
| Komatsu |
| Gold Road Resources |
Komatsu and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Komatsu and Gold Road
The main advantage of trading using opposite Komatsu and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Komatsu 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 Komatsu 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. AGF Management Limited | Gold Road vs. DATADOT TECHNOLOGY | Gold Road vs. DATATEC LTD 2 | Gold Road vs. Coor Service Management |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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