Correlation Between Balfour Beatty and GoldMining

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

By analyzing existing cross correlation between Balfour Beatty plc and GoldMining, you can compare the effects of market volatilities on Balfour Beatty and GoldMining 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 Balfour Beatty with a short position of GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balfour Beatty and GoldMining.

Diversification Opportunities for Balfour Beatty and GoldMining

0.08

Correlation Coefficient

Balfour Beatty  GoldMining

Significant diversification

The 3 months correlation between Balfour and GoldMining is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and Balfour Beatty 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 Balfour Beatty plc are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Balfour Beatty i.e., Balfour Beatty and GoldMining go up and down completely randomly.

Pair Corralation between Balfour Beatty and GoldMining

Assuming the 90 days trading horizon Balfour Beatty plc is expected to generate 0.36 times more return on investment than GoldMining. However, Balfour Beatty plc is 2.81 times less risky than GoldMining. It trades about 0.05 of its potential returns per unit of risk. GoldMining is currently generating about -0.03 per unit of risk. If you would invest  32,851  in Balfour Beatty plc on September 28, 2024 and sell it today you would earn a total of  12,509  from holding Balfour Beatty plc or generate 38.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	38.08%
Values	Daily Returns

Balfour Beatty plc  vs.  GoldMining

Balfour Beatty plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Balfour Beatty plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Balfour Beatty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Balfour Beatty and GoldMining

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

The idea behind Balfour Beatty plc and GoldMining 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.