Correlation Between M3 Mining and Truscott Mining
Can any of the company-specific risk be diversified away by investing in both M3 Mining and Truscott Mining 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 M3 Mining and Truscott Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M3 Mining and Truscott Mining Corp, you can compare the effects of market volatilities on M3 Mining and Truscott Mining 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 M3 Mining with a short position of Truscott Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 Mining and Truscott Mining.
Diversification Opportunities for M3 Mining and Truscott Mining
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between M3M and Truscott is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding M3 Mining and Truscott Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truscott Mining Corp and M3 Mining 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 M3 Mining are associated (or correlated) with Truscott Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truscott Mining Corp has no effect on the direction of M3 Mining i.e., M3 Mining and Truscott Mining go up and down completely randomly.
Pair Corralation between M3 Mining and Truscott Mining
Assuming the 90 days trading horizon M3 Mining is expected to under-perform the Truscott Mining. But the stock apears to be less risky and, when comparing its historical volatility, M3 Mining is 1.52 times less risky than Truscott Mining. The stock trades about -0.21 of its potential returns per unit of risk. The Truscott Mining Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 7.70 in Truscott Mining Corp on August 25, 2024 and sell it today you would lose (0.70) from holding Truscott Mining Corp or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
M3 Mining vs. Truscott Mining Corp
Performance |
| Timeline |
| M3 Mining |
| Truscott Mining Corp |
M3 Mining and Truscott Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M3 Mining and Truscott Mining
The main advantage of trading using opposite M3 Mining and Truscott Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Mining position performs unexpectedly, Truscott Mining 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 Truscott Mining will offset losses from the drop in Truscott Mining's long position.| M3 Mining vs. Collins Foods | M3 Mining vs. Retail Food Group | M3 Mining vs. Ainsworth Game Technology | M3 Mining vs. Mayfield Childcare |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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