Correlation Between Decade Resources and Ultra Resources

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Can any of the company-specific risk be diversified away by investing in both Decade Resources and Ultra 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 Decade Resources and Ultra Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Decade Resources and Ultra Resources, you can compare the effects of market volatilities on Decade Resources and Ultra 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 Decade Resources with a short position of Ultra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Decade Resources and Ultra Resources.

Diversification Opportunities for Decade Resources and Ultra Resources

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Decade and Ultra is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Decade Resources and Ultra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Resources and Decade 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 Decade Resources are associated (or correlated) with Ultra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Resources has no effect on the direction of Decade Resources i.e., Decade Resources and Ultra Resources go up and down completely randomly.

Pair Corralation between Decade Resources and Ultra Resources

Assuming the 90 days horizon Decade Resources is expected to generate 462.96 times less return on investment than Ultra Resources. But when comparing it to its historical volatility, Decade Resources is 23.98 times less risky than Ultra Resources. It trades about 0.01 of its potential returns per unit of risk. Ultra Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Ultra Resources on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Ultra Resources or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Decade Resources  vs.  Ultra Resources

 Performance 
       Timeline  
Decade Resources 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Decade Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Decade Resources reported solid returns over the last few months and may actually be approaching a breakup point.
Ultra Resources 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ultra Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Decade Resources and Ultra Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Decade Resources and Ultra Resources

The main advantage of trading using opposite Decade Resources and Ultra Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Decade Resources position performs unexpectedly, Ultra 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 Ultra Resources will offset losses from the drop in Ultra Resources' long position.
The idea behind Decade Resources and Ultra 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.
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 Stocks Directory module to find actively traded stocks across global markets.

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