Correlation Between Compania and Goff Corp

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

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

Diversification Opportunities for Compania and Goff Corp

0.11

Correlation Coefficient

Compania  Goff Corp

Average diversification

The 3 months correlation between Compania and Goff is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Goff Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goff Corp and Compania 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 Compania de Minas are associated (or correlated) with Goff Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goff Corp has no effect on the direction of Compania i.e., Compania and Goff Corp go up and down completely randomly.

Pair Corralation between Compania and Goff Corp

Considering the 90-day investment horizon Compania de Minas is expected to under-perform the Goff Corp. But the stock apears to be less risky and, when comparing its historical volatility, Compania de Minas is 13.59 times less risky than Goff Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Goff Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Goff Corp on September 22, 2024 and sell it today you would earn a total of  1.75  from holding Goff Corp or generate 175.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Compania de Minas  vs.  Goff Corp

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Goff Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goff Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Goff Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Goff Corp

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

The idea behind Compania de Minas and Goff Corp 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.