Correlation Between Foraco International and GoldQuest Mining

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

By analyzing existing cross correlation between Foraco International SA and GoldQuest Mining Corp, you can compare the effects of market volatilities on Foraco International and GoldQuest Mining 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 Foraco International with a short position of GoldQuest Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foraco International and GoldQuest Mining.

Diversification Opportunities for Foraco International and GoldQuest Mining

-0.37

Correlation Coefficient

Foraco International  GoldQuest Mining

Very good diversification

The 3 months correlation between Foraco and GoldQuest is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and GoldQuest Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldQuest Mining Corp and Foraco International 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 Foraco International SA are associated (or correlated) with GoldQuest Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldQuest Mining Corp has no effect on the direction of Foraco International i.e., Foraco International and GoldQuest Mining go up and down completely randomly.

Pair Corralation between Foraco International and GoldQuest Mining

Assuming the 90 days trading horizon Foraco International is expected to generate 2.32 times less return on investment than GoldQuest Mining. But when comparing it to its historical volatility, Foraco International SA is 1.83 times less risky than GoldQuest Mining. It trades about 0.1 of its potential returns per unit of risk. GoldQuest Mining Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  25.00  in GoldQuest Mining Corp on September 13, 2024 and sell it today you would earn a total of  3.00  from holding GoldQuest Mining Corp or generate 12.0% return on investment over 90 days.

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

Foraco International SA  vs.  GoldQuest Mining Corp

Foraco International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International displayed solid returns over the last few months and may actually be approaching a breakup point.

GoldQuest Mining Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GoldQuest Mining Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, GoldQuest Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foraco International and GoldQuest Mining

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

The idea behind Foraco International SA and GoldQuest Mining 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.