Correlation Between Palamina Corp and Gold Springs

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Can any of the company-specific risk be diversified away by investing in both Palamina Corp and Gold Springs 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 Palamina Corp and Gold Springs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palamina Corp and Gold Springs Resource, you can compare the effects of market volatilities on Palamina Corp and Gold Springs 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 Palamina Corp with a short position of Gold Springs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palamina Corp and Gold Springs.

Diversification Opportunities for Palamina Corp and Gold Springs

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Palamina and Gold is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Palamina Corp and Gold Springs Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Springs Resource and Palamina Corp 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 Palamina Corp are associated (or correlated) with Gold Springs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Springs Resource has no effect on the direction of Palamina Corp i.e., Palamina Corp and Gold Springs go up and down completely randomly.

Pair Corralation between Palamina Corp and Gold Springs

Assuming the 90 days horizon Palamina Corp is expected to generate 1.02 times more return on investment than Gold Springs. However, Palamina Corp is 1.02 times more volatile than Gold Springs Resource. It trades about 0.05 of its potential returns per unit of risk. Gold Springs Resource is currently generating about 0.03 per unit of risk. If you would invest  6.89  in Palamina Corp on August 25, 2024 and sell it today you would earn a total of  2.36  from holding Palamina Corp or generate 34.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Palamina Corp  vs.  Gold Springs Resource

 Performance 
       Timeline  
Palamina Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Palamina Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Palamina Corp reported solid returns over the last few months and may actually be approaching a breakup point.
Gold Springs Resource 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gold Springs Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gold Springs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Palamina Corp and Gold Springs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palamina Corp and Gold Springs

The main advantage of trading using opposite Palamina Corp and Gold Springs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palamina Corp position performs unexpectedly, Gold Springs 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 Springs will offset losses from the drop in Gold Springs' long position.
The idea behind Palamina Corp and Gold Springs Resource 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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