Correlation Between Red Pine and Hannan Metals
Can any of the company-specific risk be diversified away by investing in both Red Pine and Hannan Metals 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 Red Pine and Hannan Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Pine Exploration and Hannan Metals, you can compare the effects of market volatilities on Red Pine and Hannan Metals 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 Red Pine with a short position of Hannan Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Pine and Hannan Metals.
Diversification Opportunities for Red Pine and Hannan Metals
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Red and Hannan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Hannan Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannan Metals and Red Pine 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 Red Pine Exploration are associated (or correlated) with Hannan Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannan Metals has no effect on the direction of Red Pine i.e., Red Pine and Hannan Metals go up and down completely randomly.
Pair Corralation between Red Pine and Hannan Metals
Assuming the 90 days horizon Red Pine is expected to generate 3.9 times less return on investment than Hannan Metals. In addition to that, Red Pine is 1.05 times more volatile than Hannan Metals. It trades about 0.02 of its total potential returns per unit of risk. Hannan Metals is currently generating about 0.06 per unit of volatility. If you would invest 21.00 in Hannan Metals on September 25, 2024 and sell it today you would earn a total of 28.00 from holding Hannan Metals or generate 133.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Pine Exploration vs. Hannan Metals
Performance |
| Timeline |
| Red Pine Exploration |
| Hannan Metals |
Red Pine and Hannan Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Pine and Hannan Metals
The main advantage of trading using opposite Red Pine and Hannan Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Pine position performs unexpectedly, Hannan Metals 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 Hannan Metals will offset losses from the drop in Hannan Metals' long position.| Red Pine vs. Puma Exploration | Red Pine vs. Sixty North Gold | Red Pine vs. Altamira Gold Corp | Red Pine vs. Endurance Gold |
| Hannan Metals vs. Puma Exploration | Hannan Metals vs. Sixty North Gold | Hannan Metals vs. Red Pine Exploration | Hannan Metals vs. Altamira Gold Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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