Correlation Between Geodrill and Hammond Power

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

By analyzing existing cross correlation between Geodrill Limited and Hammond Power Solutions, you can compare the effects of market volatilities on Geodrill and Hammond Power 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 Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Hammond Power.

Diversification Opportunities for Geodrill and Hammond Power

0.77

Correlation Coefficient

Geodrill  Hammond Power

Poor diversification

The 3 months correlation between Geodrill and Hammond is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions 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 Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Geodrill i.e., Geodrill and Hammond Power go up and down completely randomly.

Pair Corralation between Geodrill and Hammond Power

Assuming the 90 days trading horizon Geodrill is expected to generate 1.92 times less return on investment than Hammond Power. But when comparing it to its historical volatility, Geodrill Limited is 1.14 times less risky than Hammond Power. It trades about 0.17 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  8,510  in Hammond Power Solutions on April 23, 2025 and sell it today you would earn a total of  4,691  from holding Hammond Power Solutions or generate 55.12% return on investment over 90 days.

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

Geodrill Limited  vs.  Hammond Power Solutions

Geodrill Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 13 (%) 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.

Hammond Power Solutions

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hammond Power Solutions are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hammond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and Hammond Power

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

The idea behind Geodrill Limited and Hammond Power Solutions 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.