Correlation Between Talisman Mining and Encounter Resources
Can any of the company-specific risk be diversified away by investing in both Talisman Mining and Encounter 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 Talisman Mining and Encounter Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talisman Mining and Encounter Resources, you can compare the effects of market volatilities on Talisman Mining and Encounter 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 Talisman Mining with a short position of Encounter Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talisman Mining and Encounter Resources.
Diversification Opportunities for Talisman Mining and Encounter Resources
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Talisman and Encounter is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Talisman Mining and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources and Talisman 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 Talisman Mining are associated (or correlated) with Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of Talisman Mining i.e., Talisman Mining and Encounter Resources go up and down completely randomly.
Pair Corralation between Talisman Mining and Encounter Resources
Assuming the 90 days trading horizon Talisman Mining is expected to under-perform the Encounter Resources. But the stock apears to be less risky and, when comparing its historical volatility, Talisman Mining is 1.89 times less risky than Encounter Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Encounter Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 36.00 in Encounter Resources on September 3, 2024 and sell it today you would earn a total of 1.00 from holding Encounter Resources or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Talisman Mining vs. Encounter Resources
Performance |
| Timeline |
| Talisman Mining |
| Encounter Resources |
Talisman Mining and Encounter Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Talisman Mining and Encounter Resources
The main advantage of trading using opposite Talisman Mining and Encounter Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talisman Mining position performs unexpectedly, Encounter 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 Encounter Resources will offset losses from the drop in Encounter Resources' long position.| Talisman Mining vs. Northern Star Resources | Talisman Mining vs. Evolution Mining | Talisman Mining vs. Bluescope Steel | Talisman Mining vs. Aneka Tambang Tbk |
| Encounter Resources vs. Cleanaway Waste Management | Encounter Resources vs. Westpac Banking | Encounter Resources vs. Pioneer Credit | Encounter Resources vs. MetalsGrove Mining |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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