Correlation Between GFG Resources and CANEX Metals

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

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

Diversification Opportunities for GFG Resources and CANEX Metals

-0.43

Correlation Coefficient

GFG Resources  CANEX Metals

Very good diversification

The 3 months correlation between GFG and CANEX is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding GFG Resources and CANEX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANEX Metals and GFG Resources 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 GFG Resources are associated (or correlated) with CANEX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANEX Metals has no effect on the direction of GFG Resources i.e., GFG Resources and CANEX Metals go up and down completely randomly.

Pair Corralation between GFG Resources and CANEX Metals

Assuming the 90 days horizon GFG Resources is expected to under-perform the CANEX Metals. But the stock apears to be less risky and, when comparing its historical volatility, GFG Resources is 2.29 times less risky than CANEX Metals. The stock trades about -0.04 of its potential returns per unit of risk. The CANEX Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5.00  in CANEX Metals on April 24, 2025 and sell it today you would earn a total of  3.50  from holding CANEX Metals or generate 70.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

GFG Resources  vs.  CANEX Metals

GFG Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days GFG Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

CANEX Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CANEX Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CANEX Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GFG Resources and CANEX Metals

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

The idea behind GFG Resources and CANEX Metals 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 Transaction History module to view history of all your transactions and understand their impact on performance.