Correlation Between Matador Mining and Monarch Mining

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

Diversification Opportunities for Matador Mining and Monarch Mining

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Matador and Monarch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Matador Mining Limited and Monarch Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Mining and Matador 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 Matador Mining Limited are associated (or correlated) with Monarch Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Mining has no effect on the direction of Matador Mining i.e., Matador Mining and Monarch Mining go up and down completely randomly.

Pair Corralation between Matador Mining and Monarch Mining

Assuming the 90 days horizon Matador Mining Limited is expected to generate 2.11 times more return on investment than Monarch Mining. However, Matador Mining is 2.11 times more volatile than Monarch Mining. It trades about 0.07 of its potential returns per unit of risk. Monarch Mining is currently generating about -0.01 per unit of risk. If you would invest  9.90  in Matador Mining Limited on August 26, 2024 and sell it today you would lose (3.42) from holding Matador Mining Limited or give up 34.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy85.6%
ValuesDaily Returns

Matador Mining Limited  vs.  Monarch Mining

 Performance 
       Timeline  
Matador Mining 

Risk-Adjusted Performance

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Over the last 90 days Matador Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Matador Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Monarch Mining 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Monarch Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Monarch Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Matador Mining and Monarch Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Matador Mining and Monarch Mining

The main advantage of trading using opposite Matador Mining and Monarch Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matador Mining position performs unexpectedly, Monarch 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 Monarch Mining will offset losses from the drop in Monarch Mining's long position.
The idea behind Matador Mining Limited and Monarch Mining 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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