Correlation Between Adriatic Metals and Rockridge Resources
Can any of the company-specific risk be diversified away by investing in both Adriatic Metals and Rockridge 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 Adriatic Metals and Rockridge Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adriatic Metals PLC and Rockridge Resources, you can compare the effects of market volatilities on Adriatic Metals and Rockridge 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 Adriatic Metals with a short position of Rockridge Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and Rockridge Resources.
Diversification Opportunities for Adriatic Metals and Rockridge Resources
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adriatic and Rockridge is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and Rockridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockridge Resources and Adriatic 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 Adriatic Metals PLC are associated (or correlated) with Rockridge Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockridge Resources has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and Rockridge Resources go up and down completely randomly.
Pair Corralation between Adriatic Metals and Rockridge Resources
Assuming the 90 days horizon Adriatic Metals is expected to generate 3.94 times less return on investment than Rockridge Resources. But when comparing it to its historical volatility, Adriatic Metals PLC is 3.8 times less risky than Rockridge Resources. It trades about 0.04 of its potential returns per unit of risk. Rockridge Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2.68 in Rockridge Resources on September 4, 2024 and sell it today you would lose (1.64) from holding Rockridge Resources or give up 61.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Adriatic Metals PLC vs. Rockridge Resources
Performance |
| Timeline |
| Adriatic Metals PLC |
| Rockridge Resources |
Adriatic Metals and Rockridge Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adriatic Metals and Rockridge Resources
The main advantage of trading using opposite Adriatic Metals and Rockridge Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals position performs unexpectedly, Rockridge 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 Rockridge Resources will offset losses from the drop in Rockridge Resources' long position.| Adriatic Metals vs. Huntsman Exploration | Adriatic Metals vs. Aurelia Metals Limited | Adriatic Metals vs. American Helium | Adriatic Metals vs. Progressive Planet Solutions |
| Rockridge Resources vs. Aurwest Resources | Rockridge Resources vs. Sassy Resources | Rockridge Resources vs. Pan Global Resources | Rockridge Resources vs. Metals X Limited |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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