Correlation Between Geodrill and New Age

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

By analyzing existing cross correlation between Geodrill Limited and New Age Metals, you can compare the effects of market volatilities on Geodrill and New Age 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 New Age. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and New Age.

Diversification Opportunities for Geodrill and New Age

0.2

Correlation Coefficient

Geodrill  New Age

Modest diversification

The 3 months correlation between Geodrill and New is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and New Age Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Age Metals 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 New Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Age Metals has no effect on the direction of Geodrill i.e., Geodrill and New Age go up and down completely randomly.

Pair Corralation between Geodrill and New Age

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 0.26 times more return on investment than New Age. However, Geodrill Limited is 3.85 times less risky than New Age. It trades about 0.1 of its potential returns per unit of risk. New Age Metals is currently generating about 0.02 per unit of risk. If you would invest  181.00  in Geodrill Limited on September 14, 2024 and sell it today you would earn a total of  130.00  from holding Geodrill Limited or generate 71.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Geodrill Limited  vs.  New Age Metals

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.

New Age Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Age Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, New Age showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and New Age

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

The idea behind Geodrill Limited and New Age Metals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.