Correlation Between Resource Base and Native Mineral
Can any of the company-specific risk be diversified away by investing in both Resource Base and Native Mineral 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 Resource Base and Native Mineral into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resource Base and Native Mineral Resources, you can compare the effects of market volatilities on Resource Base and Native Mineral 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 Resource Base with a short position of Native Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and Native Mineral.
Diversification Opportunities for Resource Base and Native Mineral
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Resource and Native is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Native Mineral Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Native Mineral Resources and Resource Base 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 Resource Base are associated (or correlated) with Native Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Native Mineral Resources has no effect on the direction of Resource Base i.e., Resource Base and Native Mineral go up and down completely randomly.
Pair Corralation between Resource Base and Native Mineral
Assuming the 90 days trading horizon Resource Base is expected to under-perform the Native Mineral. But the stock apears to be less risky and, when comparing its historical volatility, Resource Base is 1.58 times less risky than Native Mineral. The stock trades about -0.03 of its potential returns per unit of risk. The Native Mineral Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.90 in Native Mineral Resources on November 9, 2024 and sell it today you would lose (1.40) from holding Native Mineral Resources or give up 20.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Resource Base vs. Native Mineral Resources
Performance |
| Timeline |
| Resource Base |
| Native Mineral Resources |
Resource Base and Native Mineral Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resource Base and Native Mineral
The main advantage of trading using opposite Resource Base and Native Mineral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, Native Mineral 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 Native Mineral will offset losses from the drop in Native Mineral's long position.| Resource Base vs. Skycity Entertainment Group | Resource Base vs. AiMedia Technologies | Resource Base vs. Mayfield Childcare | Resource Base vs. Sports Entertainment Group |
| Native Mineral vs. Future Generation Global | Native Mineral vs. Rubicon Water | Native Mineral vs. Kinatico | Native Mineral vs. Jade Gas Holdings |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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