Correlation Between South Pacific and Ramp Metals

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Can any of the company-specific risk be diversified away by investing in both South Pacific and Ramp 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 South Pacific and Ramp Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South Pacific Metals and Ramp Metals, you can compare the effects of market volatilities on South Pacific and Ramp 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 South Pacific with a short position of Ramp Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Pacific and Ramp Metals.

Diversification Opportunities for South Pacific and Ramp Metals

SouthRampDiversified AwaySouthRampDiversified Away100%
0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between South and Ramp is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding South Pacific Metals and Ramp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramp Metals and South Pacific 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 South Pacific Metals are associated (or correlated) with Ramp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramp Metals has no effect on the direction of South Pacific i.e., South Pacific and Ramp Metals go up and down completely randomly.

Pair Corralation between South Pacific and Ramp Metals

Assuming the 90 days trading horizon South Pacific Metals is expected to under-perform the Ramp Metals. In addition to that, South Pacific is 1.29 times more volatile than Ramp Metals. It trades about -0.08 of its total potential returns per unit of risk. Ramp Metals is currently generating about 0.16 per unit of volatility. If you would invest  114.00  in Ramp Metals on November 20, 2024 and sell it today you would earn a total of  14.00  from holding Ramp Metals or generate 12.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

South Pacific Metals  vs.  Ramp Metals

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -40-30-20-100
JavaScript chart by amCharts 3.21.15SPMC RAMP
       Timeline  
South Pacific Metals 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days South Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.450.50.550.6
Ramp Metals 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ramp Metals are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Ramp Metals showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.70.80.911.11.21.31.4

South Pacific and Ramp Metals Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.39-4.79-3.18-1.580.01.533.094.646.2 0.0200.0210.0220.0230.0240.025
JavaScript chart by amCharts 3.21.15SPMC RAMP
       Returns  

Pair Trading with South Pacific and Ramp Metals

The main advantage of trading using opposite South Pacific and Ramp Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Pacific position performs unexpectedly, Ramp 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 Ramp Metals will offset losses from the drop in Ramp Metals' long position.
The idea behind South Pacific Metals and Ramp Metals 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.
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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