Correlation Between Geodrill and Foraco International

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

By analyzing existing cross correlation between Geodrill Limited and Foraco International SA, you can compare the effects of market volatilities on Geodrill and Foraco International 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 Geodrill with a short position of Foraco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Foraco International.

Diversification Opportunities for Geodrill and Foraco International

-0.15

Correlation Coefficient

Geodrill  Foraco International

Good diversification

The 3 months correlation between Geodrill and Foraco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International and Geodrill 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 Geodrill Limited are associated (or correlated) with Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Geodrill i.e., Geodrill and Foraco International go up and down completely randomly.

Pair Corralation between Geodrill and Foraco International

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 0.99 times more return on investment than Foraco International. However, Geodrill Limited is 1.01 times less risky than Foraco International. It trades about 0.15 of its potential returns per unit of risk. Foraco International SA is currently generating about 0.0 per unit of risk. If you would invest  294.00  in Geodrill Limited on April 20, 2025 and sell it today you would earn a total of  64.00  from holding Geodrill Limited or generate 21.77% return on investment over 90 days.

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

Geodrill Limited  vs.  Foraco International SA

Geodrill Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

Foraco International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foraco International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Foraco International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Geodrill and Foraco International

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

The idea behind Geodrill Limited and Foraco International SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.