Correlation Between ExGen Resources and Gungnir Resources

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

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

Diversification Opportunities for ExGen Resources and Gungnir Resources

-0.03

Correlation Coefficient

ExGen Resources  Gungnir Resources

Good diversification

The 3 months correlation between ExGen and Gungnir is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ExGen Resources and Gungnir Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gungnir Resources and ExGen 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 ExGen Resources are associated (or correlated) with Gungnir Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gungnir Resources has no effect on the direction of ExGen Resources i.e., ExGen Resources and Gungnir Resources go up and down completely randomly.

Pair Corralation between ExGen Resources and Gungnir Resources

Assuming the 90 days horizon ExGen Resources is expected to generate 1.96 times less return on investment than Gungnir Resources. But when comparing it to its historical volatility, ExGen Resources is 1.45 times less risky than Gungnir Resources. It trades about 0.02 of its potential returns per unit of risk. Gungnir Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Gungnir Resources on September 15, 2024 and sell it today you would lose (1.00) from holding Gungnir Resources or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ExGen Resources  vs.  Gungnir Resources

ExGen Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ExGen Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ExGen Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gungnir Resources

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with ExGen Resources and Gungnir Resources

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

The idea behind ExGen Resources and Gungnir Resources 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.