Correlation Between Prime Meridian and Golden Lake
Can any of the company-specific risk be diversified away by investing in both Prime Meridian and Golden Lake 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 Prime Meridian and Golden Lake into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Meridian Resources and Golden Lake Exploration, you can compare the effects of market volatilities on Prime Meridian and Golden Lake 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 Prime Meridian with a short position of Golden Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Meridian and Golden Lake.
Diversification Opportunities for Prime Meridian and Golden Lake
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prime and Golden is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prime Meridian Resources and Golden Lake Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Lake Exploration and Prime Meridian 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 Prime Meridian Resources are associated (or correlated) with Golden Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Lake Exploration has no effect on the direction of Prime Meridian i.e., Prime Meridian and Golden Lake go up and down completely randomly.
Pair Corralation between Prime Meridian and Golden Lake
Assuming the 90 days horizon Prime Meridian is expected to generate 2.56 times less return on investment than Golden Lake. But when comparing it to its historical volatility, Prime Meridian Resources is 1.6 times less risky than Golden Lake. It trades about 0.02 of its potential returns per unit of risk. Golden Lake Exploration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Golden Lake Exploration on August 29, 2024 and sell it today you would lose (1.08) from holding Golden Lake Exploration or give up 27.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Meridian Resources vs. Golden Lake Exploration
Performance |
| Timeline |
| Prime Meridian Resources |
| Golden Lake Exploration |
Prime Meridian and Golden Lake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Meridian and Golden Lake
The main advantage of trading using opposite Prime Meridian and Golden Lake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Meridian position performs unexpectedly, Golden Lake 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 Golden Lake will offset losses from the drop in Golden Lake's long position.| Prime Meridian vs. Macmahon Holdings Limited | Prime Meridian vs. Rokmaster Resources Corp | Prime Meridian vs. Hudson Resources | Prime Meridian vs. Thunder Gold Corp |
| Golden Lake vs. Prime Meridian Resources | Golden Lake vs. Macmahon Holdings Limited | Golden Lake vs. Rokmaster Resources Corp | Golden Lake vs. Hudson Resources |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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