Correlation Between Transport International and GOLD ROAD
Can any of the company-specific risk be diversified away by investing in both Transport International 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 Transport International and GOLD ROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transport International Holdings and GOLD ROAD RES, you can compare the effects of market volatilities on Transport International 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 Transport International with a short position of GOLD ROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and GOLD ROAD.
Diversification Opportunities for Transport International and GOLD ROAD
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transport and GOLD is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES and Transport International 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 Transport International Holdings 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 RES has no effect on the direction of Transport International i.e., Transport International and GOLD ROAD go up and down completely randomly.
Pair Corralation between Transport International and GOLD ROAD
Assuming the 90 days horizon Transport International Holdings is expected to under-perform the GOLD ROAD. But the stock apears to be less risky and, when comparing its historical volatility, Transport International Holdings is 1.57 times less risky than GOLD ROAD. The stock trades about -0.14 of its potential returns per unit of risk. The GOLD ROAD RES is currently generating about 0.82 of returns per unit of risk over similar time horizon. If you would invest 122.00 in GOLD ROAD RES on October 28, 2024 and sell it today you would earn a total of 26.00 from holding GOLD ROAD RES or generate 21.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transport International Holdin vs. GOLD ROAD RES
Performance |
| Timeline |
| Transport International |
| GOLD ROAD RES |
Transport International and GOLD ROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transport International and GOLD ROAD
The main advantage of trading using opposite Transport International and GOLD ROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings and GOLD ROAD RES 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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