Correlation Between Golden Ventures and Fine Metal

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

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

Diversification Opportunities for Golden Ventures and Fine Metal

0.22

Correlation Coefficient

Golden Ventures  Fine Metal

Modest diversification

The 3 months correlation between Golden and Fine is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ventures Leasehold and Fine Metal Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Metal Technologies and Golden Ventures 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 Ventures Leasehold are associated (or correlated) with Fine Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Metal Technologies has no effect on the direction of Golden Ventures i.e., Golden Ventures and Fine Metal go up and down completely randomly.

Pair Corralation between Golden Ventures and Fine Metal

Assuming the 90 days trading horizon Golden Ventures Leasehold is expected to generate 0.92 times more return on investment than Fine Metal. However, Golden Ventures Leasehold is 1.08 times less risky than Fine Metal. It trades about 0.0 of its potential returns per unit of risk. Fine Metal Technologies is currently generating about -0.01 per unit of risk. If you would invest  664.00  in Golden Ventures Leasehold on September 15, 2024 and sell it today you would lose (4.00) from holding Golden Ventures Leasehold or give up 0.6% of portfolio value over 90 days.

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

Golden Ventures Leasehold  vs.  Fine Metal Technologies

Golden Ventures Leasehold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Ventures Leasehold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Golden Ventures is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fine Metal Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fine Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Golden Ventures and Fine Metal

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

The idea behind Golden Ventures Leasehold and Fine Metal Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.