Correlation Between Empire Metals and GS Chain

Can any of the company-specific risk be diversified away by investing in both Empire Metals and GS Chain 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 Empire Metals and GS Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire Metals Limited and GS Chain PLC, you can compare the effects of market volatilities on Empire Metals and GS Chain 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 Empire Metals with a short position of GS Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and GS Chain.

Diversification Opportunities for Empire Metals and GS Chain

-0.61

Correlation Coefficient

Empire Metals  GS Chain

Excellent diversification

The 3 months correlation between Empire and GSC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and GS Chain PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Chain PLC and Empire Metals 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 Empire Metals Limited are associated (or correlated) with GS Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Chain PLC has no effect on the direction of Empire Metals i.e., Empire Metals and GS Chain go up and down completely randomly.

Pair Corralation between Empire Metals and GS Chain

Assuming the 90 days trading horizon Empire Metals is expected to generate 8.06 times less return on investment than GS Chain. But when comparing it to its historical volatility, Empire Metals Limited is 21.14 times less risky than GS Chain. It trades about 0.3 of its potential returns per unit of risk. GS Chain PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  60.00  in GS Chain PLC on April 23, 2025 and sell it today you would lose (15.00) from holding GS Chain PLC or give up 25.0% of portfolio value over 90 days.

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

Empire Metals Limited  vs.  GS Chain PLC

Empire Metals Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Empire Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

GS Chain PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GS Chain PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GS Chain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire Metals and GS Chain

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

The idea behind Empire Metals Limited and GS Chain PLC 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.