Correlation Between Southern Cross and Mount Gibson
Can any of the company-specific risk be diversified away by investing in both Southern Cross and Mount Gibson 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 Southern Cross and Mount Gibson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Cross Gold and Mount Gibson Iron, you can compare the effects of market volatilities on Southern Cross and Mount Gibson 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 Southern Cross with a short position of Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Cross and Mount Gibson.
Diversification Opportunities for Southern Cross and Mount Gibson
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Mount is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Southern Cross Gold and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and Southern Cross 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 Southern Cross Gold are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Southern Cross i.e., Southern Cross and Mount Gibson go up and down completely randomly.
Pair Corralation between Southern Cross and Mount Gibson
Assuming the 90 days trading horizon Southern Cross Gold is expected to generate 1.97 times more return on investment than Mount Gibson. However, Southern Cross is 1.97 times more volatile than Mount Gibson Iron. It trades about 0.11 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about -0.06 per unit of risk. If you would invest 90.00 in Southern Cross Gold on September 1, 2024 and sell it today you would earn a total of 206.00 from holding Southern Cross Gold or generate 228.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Cross Gold vs. Mount Gibson Iron
Performance |
| Timeline |
| Southern Cross Gold |
| Mount Gibson Iron |
Southern Cross and Mount Gibson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Cross and Mount Gibson
The main advantage of trading using opposite Southern Cross and Mount Gibson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Cross position performs unexpectedly, Mount Gibson 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 Mount Gibson will offset losses from the drop in Mount Gibson's long position.| Southern Cross vs. Northern Star Resources | Southern Cross vs. Evolution Mining | Southern Cross vs. Bluescope Steel | Southern Cross vs. Sandfire Resources NL |
| Mount Gibson vs. Northern Star Resources | Mount Gibson vs. Evolution Mining | Mount Gibson vs. Bluescope Steel | Mount Gibson vs. Sandfire Resources NL |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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