Correlation Between Gold Bond and Scope Metals

Can any of the company-specific risk be diversified away by investing in both Gold Bond and Scope Metals 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 Scope Metals 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 Scope Metals Group, you can compare the effects of market volatilities on Gold Bond and Scope Metals 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 Scope Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Bond and Scope Metals.

Diversification Opportunities for Gold Bond and Scope Metals

0.87

Correlation Coefficient

Gold Bond  Scope Metals

Very poor diversification

The 3 months correlation between Gold and Scope is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bond and Scope Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scope Metals 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 Scope Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scope Metals Group has no effect on the direction of Gold Bond i.e., Gold Bond and Scope Metals go up and down completely randomly.

Pair Corralation between Gold Bond and Scope Metals

Assuming the 90 days trading horizon Gold Bond is expected to generate 1.64 times less return on investment than Scope Metals. But when comparing it to its historical volatility, The Gold Bond is 1.43 times less risky than Scope Metals. It trades about 0.29 of its potential returns per unit of risk. Scope Metals Group is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,041,000  in Scope Metals Group on September 15, 2024 and sell it today you would earn a total of  416,000  from holding Scope Metals Group or generate 39.96% 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.  Scope Metals 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.

Scope Metals Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Scope Metals Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Scope Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Bond and Scope Metals

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

The idea behind The Gold Bond and Scope Metals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.