Correlation Between Gold Bond and Globrands

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

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

Diversification Opportunities for Gold Bond and Globrands

0.8

Correlation Coefficient

Gold Bond  Globrands

Very poor diversification

The 3 months correlation between Gold and Globrands is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bond and Globrands Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globrands Group and Gold Bond 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 The Gold Bond are associated (or correlated) with Globrands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globrands Group has no effect on the direction of Gold Bond i.e., Gold Bond and Globrands go up and down completely randomly.

Pair Corralation between Gold Bond and Globrands

Assuming the 90 days trading horizon The Gold Bond is expected to generate 1.23 times more return on investment than Globrands. However, Gold Bond is 1.23 times more volatile than Globrands Group. It trades about 0.29 of its potential returns per unit of risk. Globrands Group is currently generating about 0.3 per unit of risk. If you would invest  1,276,391  in The Gold Bond on September 15, 2024 and sell it today you would earn a total of  293,609  from holding The Gold Bond or generate 23.0% return on investment over 90 days.

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

The Gold Bond  vs.  Globrands Group

Gold Bond

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bond are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bond sustained solid returns over the last few months and may actually be approaching a breakup point.

Globrands Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globrands Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Globrands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Bond and Globrands

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

The idea behind The Gold Bond and Globrands Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.