Correlation Between Japan Gold and GFG Resources

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

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

Diversification Opportunities for Japan Gold and GFG Resources

0.29

Correlation Coefficient

Japan Gold  GFG Resources

Modest diversification

The 3 months correlation between Japan and GFG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Japan Gold Corp and GFG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFG Resources and Japan Gold 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 Japan Gold Corp are associated (or correlated) with GFG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFG Resources has no effect on the direction of Japan Gold i.e., Japan Gold and GFG Resources go up and down completely randomly.

Pair Corralation between Japan Gold and GFG Resources

Assuming the 90 days horizon Japan Gold Corp is expected to under-perform the GFG Resources. In addition to that, Japan Gold is 1.28 times more volatile than GFG Resources. It trades about -0.01 of its total potential returns per unit of risk. GFG Resources is currently generating about 0.04 per unit of volatility. If you would invest  7.05  in GFG Resources on September 13, 2024 and sell it today you would earn a total of  3.95  from holding GFG Resources or generate 56.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Japan Gold Corp  vs.  GFG Resources

Japan Gold Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Gold Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Japan Gold reported solid returns over the last few months and may actually be approaching a breakup point.

GFG Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GFG Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GFG Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Gold and GFG Resources

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

The idea behind Japan Gold Corp and GFG Resources 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.