Correlation Between Penta Ocean and Gold Road

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

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

Diversification Opportunities for Penta Ocean and Gold Road

-0.03

Correlation Coefficient

Penta Ocean  Gold Road

Good diversification

The 3 months correlation between Penta and Gold is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of Penta Ocean i.e., Penta Ocean and Gold Road go up and down completely randomly.

Pair Corralation between Penta Ocean and Gold Road

Assuming the 90 days horizon Penta Ocean Construction Co is expected to under-perform the Gold Road. But the stock apears to be less risky and, when comparing its historical volatility, Penta Ocean Construction Co is 1.65 times less risky than Gold Road. The stock trades about -0.03 of its potential returns per unit of risk. The Gold Road Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Gold Road Resources on September 26, 2024 and sell it today you would earn a total of  18.00  from holding Gold Road Resources or generate 17.65% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Gold Road Resources

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gold Road Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penta Ocean and Gold Road

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

The idea behind Penta Ocean Construction Co and Gold Road 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.