Correlation Between Loncor Resources and Thor Explorations
Can any of the company-specific risk be diversified away by investing in both Loncor Resources and Thor Explorations 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 Loncor Resources and Thor Explorations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loncor Resources and Thor Explorations, you can compare the effects of market volatilities on Loncor Resources and Thor Explorations 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 Loncor Resources with a short position of Thor Explorations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loncor Resources and Thor Explorations.
Diversification Opportunities for Loncor Resources and Thor Explorations
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Loncor and Thor is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Loncor Resources and Thor Explorations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Explorations and Loncor 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 Loncor Resources are associated (or correlated) with Thor Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Explorations has no effect on the direction of Loncor Resources i.e., Loncor Resources and Thor Explorations go up and down completely randomly.
Pair Corralation between Loncor Resources and Thor Explorations
Assuming the 90 days horizon Loncor Resources is expected to generate 2.17 times less return on investment than Thor Explorations. In addition to that, Loncor Resources is 2.69 times more volatile than Thor Explorations. It trades about 0.06 of its total potential returns per unit of risk. Thor Explorations is currently generating about 0.32 per unit of volatility. If you would invest 30.00 in Thor Explorations on November 4, 2024 and sell it today you would earn a total of 5.00 from holding Thor Explorations or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loncor Resources vs. Thor Explorations
Performance |
| Timeline |
| Loncor Resources |
| Thor Explorations |
Loncor Resources and Thor Explorations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loncor Resources and Thor Explorations
The main advantage of trading using opposite Loncor Resources and Thor Explorations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loncor Resources position performs unexpectedly, Thor Explorations 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 Thor Explorations will offset losses from the drop in Thor Explorations' long position.The idea behind Loncor Resources and Thor Explorations 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.| Thor Explorations vs. Sarama Resource | Thor Explorations vs. Taranis Resources | Thor Explorations vs. Teras Resources |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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