Correlation Between Alliance Resource and Natural Resource
Can any of the company-specific risk be diversified away by investing in both Alliance Resource and Natural Resource 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 Alliance Resource and Natural Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Resource Partners and Natural Resource Partners, you can compare the effects of market volatilities on Alliance Resource and Natural Resource 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 Alliance Resource with a short position of Natural Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Resource and Natural Resource.
Diversification Opportunities for Alliance Resource and Natural Resource
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alliance and Natural is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Resource Partners and Natural Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Resource Partners and Alliance Resource 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 Alliance Resource Partners are associated (or correlated) with Natural Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Resource Partners has no effect on the direction of Alliance Resource i.e., Alliance Resource and Natural Resource go up and down completely randomly.
Pair Corralation between Alliance Resource and Natural Resource
Given the investment horizon of 90 days Alliance Resource Partners is expected to generate 0.78 times more return on investment than Natural Resource. However, Alliance Resource Partners is 1.28 times less risky than Natural Resource. It trades about 0.34 of its potential returns per unit of risk. Natural Resource Partners is currently generating about 0.23 per unit of risk. If you would invest 2,445 in Alliance Resource Partners on August 24, 2024 and sell it today you would earn a total of 343.00 from holding Alliance Resource Partners or generate 14.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Resource Partners vs. Natural Resource Partners
Performance |
| Timeline |
| Alliance Resource |
| Natural Resource Partners |
Alliance Resource and Natural Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Resource and Natural Resource
The main advantage of trading using opposite Alliance Resource and Natural Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Resource position performs unexpectedly, Natural Resource 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 Natural Resource will offset losses from the drop in Natural Resource's long position.| Alliance Resource vs. Peabody Energy Corp | Alliance Resource vs. Natural Resource Partners | Alliance Resource vs. Hallador Energy | Alliance Resource vs. NACCO Industries |
| Natural Resource vs. Hallador Energy | Natural Resource vs. Consol Energy | Natural Resource vs. Adaro Energy Tbk | Natural Resource vs. Alliance Resource Partners |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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