Correlation Between Golden Metal and Axis Bank

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

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

Diversification Opportunities for Golden Metal and Axis Bank

-0.4

Correlation Coefficient

Golden Metal  Axis Bank

Very good diversification

The 3 months correlation between Golden and Axis is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Axis Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axis Bank and Golden Metal 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 Golden Metal Resources are associated (or correlated) with Axis Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axis Bank has no effect on the direction of Golden Metal i.e., Golden Metal and Axis Bank go up and down completely randomly.

Pair Corralation between Golden Metal and Axis Bank

Assuming the 90 days trading horizon Golden Metal Resources is expected to under-perform the Axis Bank. In addition to that, Golden Metal is 1.54 times more volatile than Axis Bank Ltd. It trades about -0.31 of its total potential returns per unit of risk. Axis Bank Ltd is currently generating about -0.26 per unit of volatility. If you would invest  6,740  in Axis Bank Ltd on September 27, 2024 and sell it today you would lose (420.00) from holding Axis Bank Ltd or give up 6.23% of portfolio value over 90 days.

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

Golden Metal Resources  vs.  Axis Bank Ltd

Golden Metal Resources

Risk-Adjusted Performance

4 of 100

Insignificant

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

Axis Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Golden Metal and Axis Bank

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

The idea behind Golden Metal Resources and Axis Bank Ltd 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..