Correlation Between Smithson Investment and Golden Metal
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Golden Metal 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 Smithson Investment and Golden Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Golden Metal Resources, you can compare the effects of market volatilities on Smithson Investment and Golden Metal 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 Smithson Investment with a short position of Golden Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Golden Metal.
Diversification Opportunities for Smithson Investment and Golden Metal
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smithson and Golden is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Golden Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Metal Resources and Smithson Investment 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 Smithson Investment Trust are associated (or correlated) with Golden Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Metal Resources has no effect on the direction of Smithson Investment i.e., Smithson Investment and Golden Metal go up and down completely randomly.
Pair Corralation between Smithson Investment and Golden Metal
Assuming the 90 days trading horizon Smithson Investment is expected to generate 4.98 times less return on investment than Golden Metal. But when comparing it to its historical volatility, Smithson Investment Trust is 2.57 times less risky than Golden Metal. It trades about 0.17 of its potential returns per unit of risk. Golden Metal Resources is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,800 in Golden Metal Resources on October 23, 2024 and sell it today you would earn a total of 400.00 from holding Golden Metal Resources or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Smithson Investment Trust vs. Golden Metal Resources
Performance |
| Timeline |
| Smithson Investment Trust |
| Golden Metal Resources |
Smithson Investment and Golden Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Golden Metal
The main advantage of trading using opposite Smithson Investment and Golden Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Golden Metal 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 Metal will offset losses from the drop in Golden Metal's long position.| Smithson Investment vs. Catalyst Media Group | Smithson Investment vs. CATLIN GROUP | Smithson Investment vs. Tamburi Investment Partners | Smithson Investment vs. Magnora ASA |
| Golden Metal vs. BlackRock Frontiers Investment | Golden Metal vs. Bankers Investment Trust | Golden Metal vs. Software Circle plc | Golden Metal vs. Smithson Investment Trust |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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