Correlation Between Gold Road and SEGRO Plc

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

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

Diversification Opportunities for Gold Road and SEGRO Plc

-0.69

Correlation Coefficient

Gold Road  SEGRO Plc

Excellent diversification

The 3 months correlation between Gold and SEGRO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and SEGRO Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEGRO Plc and Gold Road 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 Gold Road Resources are associated (or correlated) with SEGRO Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEGRO Plc has no effect on the direction of Gold Road i.e., Gold Road and SEGRO Plc go up and down completely randomly.

Pair Corralation between Gold Road and SEGRO Plc

Assuming the 90 days horizon Gold Road Resources is expected to generate 1.33 times more return on investment than SEGRO Plc. However, Gold Road is 1.33 times more volatile than SEGRO Plc. It trades about 0.24 of its potential returns per unit of risk. SEGRO Plc is currently generating about -0.16 per unit of risk. If you would invest  92.00  in Gold Road Resources on September 12, 2024 and sell it today you would earn a total of  38.00  from holding Gold Road Resources or generate 41.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Gold Road Resources  vs.  SEGRO Plc

Gold Road Resources

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

SEGRO Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEGRO Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gold Road and SEGRO Plc

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

The idea behind Gold Road Resources and SEGRO Plc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.