Correlation Between BCM Resources and Geodrill

Can any of the company-specific risk be diversified away by investing in both BCM Resources and Geodrill 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 BCM Resources and Geodrill into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BCM Resources Corp and Geodrill Limited, you can compare the effects of market volatilities on BCM Resources and Geodrill 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 BCM Resources with a short position of Geodrill. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCM Resources and Geodrill.

Diversification Opportunities for BCM Resources and Geodrill

0.29

Correlation Coefficient

BCM Resources  Geodrill

Modest diversification

The 3 months correlation between BCM and Geodrill is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BCM Resources Corp and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited and BCM Resources 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 BCM Resources Corp are associated (or correlated) with Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of BCM Resources i.e., BCM Resources and Geodrill go up and down completely randomly.

Pair Corralation between BCM Resources and Geodrill

Considering the 90-day investment horizon BCM Resources Corp is expected to generate 3.71 times more return on investment than Geodrill. However, BCM Resources is 3.71 times more volatile than Geodrill Limited. It trades about 0.04 of its potential returns per unit of risk. Geodrill Limited is currently generating about 0.13 per unit of risk. If you would invest  5.00  in BCM Resources Corp on September 15, 2024 and sell it today you would earn a total of  0.00  from holding BCM Resources Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BCM Resources Corp  vs.  Geodrill Limited

BCM Resources Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BCM Resources Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, BCM Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Geodrill Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCM Resources and Geodrill

The main advantage of trading using opposite BCM Resources and Geodrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCM Resources position performs unexpectedly, Geodrill 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 Geodrill will offset losses from the drop in Geodrill's long position.

The idea behind BCM Resources Corp and Geodrill Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.