Correlation Between Prodigy Gold and G8 Education
Can any of the company-specific risk be diversified away by investing in both Prodigy Gold and G8 Education 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 Prodigy Gold and G8 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prodigy Gold NL and G8 Education, you can compare the effects of market volatilities on Prodigy Gold and G8 Education 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 Prodigy Gold with a short position of G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prodigy Gold and G8 Education.
Diversification Opportunities for Prodigy Gold and G8 Education
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Prodigy and GEM is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Prodigy Gold NL and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education and Prodigy Gold 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 Prodigy Gold NL are associated (or correlated) with G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Prodigy Gold i.e., Prodigy Gold and G8 Education go up and down completely randomly.
Pair Corralation between Prodigy Gold and G8 Education
Assuming the 90 days trading horizon Prodigy Gold NL is expected to generate 7.55 times more return on investment than G8 Education. However, Prodigy Gold is 7.55 times more volatile than G8 Education. It trades about 0.05 of its potential returns per unit of risk. G8 Education is currently generating about 0.06 per unit of risk. If you would invest 0.70 in Prodigy Gold NL on September 2, 2024 and sell it today you would lose (0.50) from holding Prodigy Gold NL or give up 71.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prodigy Gold NL vs. G8 Education
Performance |
| Timeline |
| Prodigy Gold NL |
| G8 Education |
Prodigy Gold and G8 Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prodigy Gold and G8 Education
The main advantage of trading using opposite Prodigy Gold and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prodigy Gold position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education's long position.| Prodigy Gold vs. Northern Star Resources | Prodigy Gold vs. Evolution Mining | Prodigy Gold vs. Bluescope Steel | Prodigy Gold vs. Sandfire Resources NL |
| G8 Education vs. ACDC Metals | G8 Education vs. Alto Metals | G8 Education vs. Leeuwin Metals | G8 Education vs. Stelar Metals |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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