Correlation Between Transatlantic Mining and Sarama Resource
Can any of the company-specific risk be diversified away by investing in both Transatlantic Mining and Sarama Resource 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 Transatlantic Mining and Sarama Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transatlantic Mining Corp and Sarama Resource, you can compare the effects of market volatilities on Transatlantic Mining and Sarama Resource 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 Transatlantic Mining with a short position of Sarama Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transatlantic Mining and Sarama Resource.
Diversification Opportunities for Transatlantic Mining and Sarama Resource
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Transatlantic and Sarama is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Transatlantic Mining Corp and Sarama Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarama Resource and Transatlantic Mining 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 Transatlantic Mining Corp are associated (or correlated) with Sarama Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarama Resource has no effect on the direction of Transatlantic Mining i.e., Transatlantic Mining and Sarama Resource go up and down completely randomly.
Pair Corralation between Transatlantic Mining and Sarama Resource
Assuming the 90 days horizon Transatlantic Mining is expected to generate 1.45 times less return on investment than Sarama Resource. But when comparing it to its historical volatility, Transatlantic Mining Corp is 1.01 times less risky than Sarama Resource. It trades about 0.09 of its potential returns per unit of risk. Sarama Resource is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Sarama Resource on August 25, 2024 and sell it today you would earn a total of 1.00 from holding Sarama Resource or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transatlantic Mining Corp vs. Sarama Resource
Performance |
| Timeline |
| Transatlantic Mining Corp |
| Sarama Resource |
Transatlantic Mining and Sarama Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transatlantic Mining and Sarama Resource
The main advantage of trading using opposite Transatlantic Mining and Sarama Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transatlantic Mining position performs unexpectedly, Sarama Resource 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 Sarama Resource will offset losses from the drop in Sarama Resource's long position.The idea behind Transatlantic Mining Corp and Sarama Resource 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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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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