Correlation Between China Gold and Parex Resources
Can any of the company-specific risk be diversified away by investing in both China Gold and Parex 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 China Gold and Parex Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Gold International and Parex Resources, you can compare the effects of market volatilities on China Gold and Parex 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 China Gold with a short position of Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Gold and Parex Resources.
Diversification Opportunities for China Gold and Parex Resources
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Parex is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Gold International and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources and China 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 China Gold International are associated (or correlated) with Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of China Gold i.e., China Gold and Parex Resources go up and down completely randomly.
Pair Corralation between China Gold and Parex Resources
Assuming the 90 days trading horizon China Gold is expected to generate 5.45 times less return on investment than Parex Resources. In addition to that, China Gold is 2.18 times more volatile than Parex Resources. It trades about 0.04 of its total potential returns per unit of risk. Parex Resources is currently generating about 0.53 per unit of volatility. If you would invest 2,120 in Parex Resources on January 20, 2024 and sell it today you would earn a total of 241.00 from holding Parex Resources or generate 11.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Gold International vs. Parex Resources
Performance |
| Timeline |
| China Gold International |
| Parex Resources |
China Gold and Parex Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Gold and Parex Resources
The main advantage of trading using opposite China Gold and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Gold position performs unexpectedly, Parex 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 Parex Resources will offset losses from the drop in Parex Resources' long position.The idea behind China Gold International and Parex 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.| Parex Resources vs. Sintana Energy | Parex Resources vs. Southern Energy Corp | Parex Resources vs. Ngx Energy International | Parex Resources vs. Kolibri Global Energy |
Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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