Correlation Between Searchlight Resources and Durango Resources
Can any of the company-specific risk be diversified away by investing in both Searchlight Resources and Durango 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 Searchlight Resources and Durango Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Searchlight Resources and Durango Resources, you can compare the effects of market volatilities on Searchlight Resources and Durango 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 Searchlight Resources with a short position of Durango Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Searchlight Resources and Durango Resources.
Diversification Opportunities for Searchlight Resources and Durango Resources
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Searchlight and Durango is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Searchlight Resources and Durango Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durango Resources and Searchlight Resources 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 Searchlight Resources are associated (or correlated) with Durango Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durango Resources has no effect on the direction of Searchlight Resources i.e., Searchlight Resources and Durango Resources go up and down completely randomly.
Pair Corralation between Searchlight Resources and Durango Resources
Assuming the 90 days horizon Searchlight Resources is expected to generate 1.57 times more return on investment than Durango Resources. However, Searchlight Resources is 1.57 times more volatile than Durango Resources. It trades about 0.05 of its potential returns per unit of risk. Durango Resources is currently generating about 0.0 per unit of risk. If you would invest 0.51 in Searchlight Resources on August 28, 2024 and sell it today you would lose (0.08) from holding Searchlight Resources or give up 15.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Searchlight Resources vs. Durango Resources
Performance |
| Timeline |
| Searchlight Resources |
| Durango Resources |
Searchlight Resources and Durango Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Searchlight Resources and Durango Resources
The main advantage of trading using opposite Searchlight Resources and Durango Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Searchlight Resources position performs unexpectedly, Durango 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 Durango Resources will offset losses from the drop in Durango Resources' long position.The idea behind Searchlight Resources and Durango 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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