Correlation Between Chibougamau Independent and Laramide Resources
Can any of the company-specific risk be diversified away by investing in both Chibougamau Independent and Laramide 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 Chibougamau Independent and Laramide Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chibougamau Independent Mines and Laramide Resources, you can compare the effects of market volatilities on Chibougamau Independent and Laramide 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 Chibougamau Independent with a short position of Laramide Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chibougamau Independent and Laramide Resources.
Diversification Opportunities for Chibougamau Independent and Laramide Resources
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chibougamau and Laramide is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chibougamau Independent Mines and Laramide Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laramide Resources and Chibougamau Independent 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 Chibougamau Independent Mines are associated (or correlated) with Laramide Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laramide Resources has no effect on the direction of Chibougamau Independent i.e., Chibougamau Independent and Laramide Resources go up and down completely randomly.
Pair Corralation between Chibougamau Independent and Laramide Resources
Assuming the 90 days horizon Chibougamau Independent Mines is expected to under-perform the Laramide Resources. But the stock apears to be less risky and, when comparing its historical volatility, Chibougamau Independent Mines is 1.37 times less risky than Laramide Resources. The stock trades about -0.11 of its potential returns per unit of risk. The Laramide Resources is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 75.00 in Laramide Resources on September 12, 2024 and sell it today you would lose (5.00) from holding Laramide Resources or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chibougamau Independent Mines vs. Laramide Resources
Performance |
| Timeline |
| Chibougamau Independent |
| Laramide Resources |
Chibougamau Independent and Laramide Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chibougamau Independent and Laramide Resources
The main advantage of trading using opposite Chibougamau Independent and Laramide Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chibougamau Independent position performs unexpectedly, Laramide 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 Laramide Resources will offset losses from the drop in Laramide Resources' long position.The idea behind Chibougamau Independent Mines and Laramide Resources 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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