Correlation Between Group Ten and Canadian Palladium

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

By analyzing existing cross correlation between Group Ten Metals and Canadian Palladium Resources, you can compare the effects of market volatilities on Group Ten and Canadian Palladium 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 Group Ten with a short position of Canadian Palladium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group Ten and Canadian Palladium.

Diversification Opportunities for Group Ten and Canadian Palladium

-0.32

Correlation Coefficient

Group Ten  Canadian Palladium

Very good diversification

The 3 months correlation between Group and Canadian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Group Ten Metals and Canadian Palladium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Palladium and Group Ten 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 Group Ten Metals are associated (or correlated) with Canadian Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Palladium has no effect on the direction of Group Ten i.e., Group Ten and Canadian Palladium go up and down completely randomly.

Pair Corralation between Group Ten and Canadian Palladium

Assuming the 90 days horizon Group Ten Metals is expected to generate 0.62 times more return on investment than Canadian Palladium. However, Group Ten Metals is 1.6 times less risky than Canadian Palladium. It trades about 0.08 of its potential returns per unit of risk. Canadian Palladium Resources is currently generating about -0.01 per unit of risk. If you would invest  8.00  in Group Ten Metals on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Group Ten Metals or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Group Ten Metals  vs.  Canadian Palladium Resources

Group Ten Metals

Risk-Adjusted Performance

6 of 100

Modest

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

Canadian Palladium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Palladium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Group Ten and Canadian Palladium

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

The idea behind Group Ten Metals and Canadian Palladium 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.