Correlation Between Copper Lake and Colonial Coal
Can any of the company-specific risk be diversified away by investing in both Copper Lake and Colonial Coal 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 Copper Lake and Colonial Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Copper Lake Resources and Colonial Coal International, you can compare the effects of market volatilities on Copper Lake and Colonial Coal 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 Copper Lake with a short position of Colonial Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copper Lake and Colonial Coal.
Diversification Opportunities for Copper Lake and Colonial Coal
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Copper and Colonial is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Copper Lake Resources and Colonial Coal International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colonial Coal Intern and Copper Lake 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 Copper Lake Resources are associated (or correlated) with Colonial Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colonial Coal Intern has no effect on the direction of Copper Lake i.e., Copper Lake and Colonial Coal go up and down completely randomly.
Pair Corralation between Copper Lake and Colonial Coal
Assuming the 90 days horizon Copper Lake Resources is expected to generate 3.74 times more return on investment than Colonial Coal. However, Copper Lake is 3.74 times more volatile than Colonial Coal International. It trades about 0.04 of its potential returns per unit of risk. Colonial Coal International is currently generating about 0.04 per unit of risk. If you would invest 7.00 in Copper Lake Resources on September 3, 2024 and sell it today you would lose (6.50) from holding Copper Lake Resources or give up 92.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copper Lake Resources vs. Colonial Coal International
Performance |
| Timeline |
| Copper Lake Resources |
| Colonial Coal Intern |
Copper Lake and Colonial Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copper Lake and Colonial Coal
The main advantage of trading using opposite Copper Lake and Colonial Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copper Lake position performs unexpectedly, Colonial Coal 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 Colonial Coal will offset losses from the drop in Colonial Coal's long position.| Copper Lake vs. Black Widow Resources | Copper Lake vs. Eros Resources Corp | Copper Lake vs. Magnum Goldcorp |
| Colonial Coal vs. Batero Gold Corp | Colonial Coal vs. Bravada Gold | Colonial Coal vs. Black Widow Resources | Colonial Coal vs. Angkor Resources Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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