Correlation Between Red 5 and American Pacific
Can any of the company-specific risk be diversified away by investing in both Red 5 and American Pacific 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 5 and American Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red 5 Limited and American Pacific Mining, you can compare the effects of market volatilities on Red 5 and American Pacific 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 5 with a short position of American Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red 5 and American Pacific.
Diversification Opportunities for Red 5 and American Pacific
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Red and American is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Red 5 Limited and American Pacific Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Pacific Mining and Red 5 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 5 Limited are associated (or correlated) with American Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Pacific Mining has no effect on the direction of Red 5 i.e., Red 5 and American Pacific go up and down completely randomly.
Pair Corralation between Red 5 and American Pacific
Assuming the 90 days horizon Red 5 is expected to generate 9.4 times less return on investment than American Pacific. But when comparing it to its historical volatility, Red 5 Limited is 8.74 times less risky than American Pacific. It trades about 0.32 of its potential returns per unit of risk. American Pacific Mining is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 9.00 in American Pacific Mining on September 4, 2024 and sell it today you would earn a total of 9.00 from holding American Pacific Mining or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Red 5 Limited vs. American Pacific Mining
Performance |
| Timeline |
| Red 5 Limited |
| American Pacific Mining |
Red 5 and American Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red 5 and American Pacific
The main advantage of trading using opposite Red 5 and American Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red 5 position performs unexpectedly, American Pacific 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 American Pacific will offset losses from the drop in American Pacific's long position.| Red 5 vs. Cerrado Gold | Red 5 vs. First Mining Gold | Red 5 vs. American Pacific Mining | Red 5 vs. Cache Exploration |
| American Pacific vs. Harmony Gold Mining | American Pacific vs. SPACE | American Pacific vs. T Rowe Price | American Pacific vs. Ampleforth |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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