Correlation Between RT Minerals and Signature Resources
Can any of the company-specific risk be diversified away by investing in both RT Minerals and Signature Resources 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 RT Minerals and Signature Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RT Minerals Corp and Signature Resources, you can compare the effects of market volatilities on RT Minerals and Signature Resources 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 RT Minerals with a short position of Signature Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of RT Minerals and Signature Resources.
Diversification Opportunities for RT Minerals and Signature Resources
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between RTM and Signature is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding RT Minerals Corp and Signature Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Resources and RT Minerals 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 RT Minerals Corp are associated (or correlated) with Signature Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Resources has no effect on the direction of RT Minerals i.e., RT Minerals and Signature Resources go up and down completely randomly.
Pair Corralation between RT Minerals and Signature Resources
Assuming the 90 days horizon RT Minerals Corp is expected to under-perform the Signature Resources. But the stock apears to be less risky and, when comparing its historical volatility, RT Minerals Corp is 2.14 times less risky than Signature Resources. The stock trades about -0.16 of its potential returns per unit of risk. The Signature Resources is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3.50 in Signature Resources on August 29, 2024 and sell it today you would earn a total of 1.00 from holding Signature Resources or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RT Minerals Corp vs. Signature Resources
Performance |
| Timeline |
| RT Minerals Corp |
| Signature Resources |
RT Minerals and Signature Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RT Minerals and Signature Resources
The main advantage of trading using opposite RT Minerals and Signature Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RT Minerals position performs unexpectedly, Signature Resources 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 Signature Resources will offset losses from the drop in Signature Resources' long position.The idea behind RT Minerals Corp and Signature Resources 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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