Correlation Between Geodrill and Commander Resources

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

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

Diversification Opportunities for Geodrill and Commander Resources

0.71

Correlation Coefficient

Geodrill  Commander Resources

Poor diversification

The 3 months correlation between Geodrill and Commander is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources and Geodrill 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 Geodrill Limited are associated (or correlated) with Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Geodrill i.e., Geodrill and Commander Resources go up and down completely randomly.

Pair Corralation between Geodrill and Commander Resources

Assuming the 90 days trading horizon Geodrill is expected to generate 1.45 times less return on investment than Commander Resources. But when comparing it to its historical volatility, Geodrill Limited is 3.03 times less risky than Commander Resources. It trades about 0.13 of its potential returns per unit of risk. Commander Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Commander Resources on September 15, 2024 and sell it today you would earn a total of  1.00  from holding Commander Resources or generate 14.29% return on investment over 90 days.

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

Geodrill Limited  vs.  Commander Resources

Geodrill Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

Commander Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commander Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Commander Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and Commander Resources

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

The idea behind Geodrill Limited and Commander 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.