Correlation Between Vulcan Steel and Gold Road
Can any of the company-specific risk be diversified away by investing in both Vulcan Steel and Gold Road 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 Vulcan Steel and Gold Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vulcan Steel and Gold Road Resources, you can compare the effects of market volatilities on Vulcan Steel and Gold Road 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 Vulcan Steel with a short position of Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Steel and Gold Road.
Diversification Opportunities for Vulcan Steel and Gold Road
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vulcan and Gold is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources and Vulcan Steel 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 Vulcan Steel are associated (or correlated) with Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and Gold Road go up and down completely randomly.
Pair Corralation between Vulcan Steel and Gold Road
Assuming the 90 days trading horizon Vulcan Steel is expected to generate 1.66 times less return on investment than Gold Road. In addition to that, Vulcan Steel is 1.48 times more volatile than Gold Road Resources. It trades about 0.03 of its total potential returns per unit of risk. Gold Road Resources is currently generating about 0.06 per unit of volatility. If you would invest 163.00 in Gold Road Resources on September 2, 2024 and sell it today you would earn a total of 24.00 from holding Gold Road Resources or generate 14.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vulcan Steel vs. Gold Road Resources
Performance |
| Timeline |
| Vulcan Steel |
| Gold Road Resources |
Vulcan Steel and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vulcan Steel and Gold Road
The main advantage of trading using opposite Vulcan Steel and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Steel position performs unexpectedly, Gold Road 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 Road will offset losses from the drop in Gold Road's long position.| Vulcan Steel vs. Northern Star Resources | Vulcan Steel vs. Evolution Mining | Vulcan Steel vs. Bluescope Steel | Vulcan Steel vs. Sandfire Resources NL |
| Gold Road vs. Carlton Investments | Gold Road vs. Queste Communications | Gold Road vs. Flagship Investments | Gold Road vs. Qbe Insurance Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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