Correlation Between Aldebaran Resources and Cypress Development

Can any of the company-specific risk be diversified away by investing in both Aldebaran Resources and Cypress Development 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 Aldebaran Resources and Cypress Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldebaran Resources and Cypress Development Corp, you can compare the effects of market volatilities on Aldebaran Resources and Cypress Development 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 Aldebaran Resources with a short position of Cypress Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldebaran Resources and Cypress Development.

Diversification Opportunities for Aldebaran Resources and Cypress Development

-0.56

Correlation Coefficient

Aldebaran Resources  Cypress Development

Excellent diversification

The 3 months correlation between Aldebaran and Cypress is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aldebaran Resources and Cypress Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cypress Development Corp and Aldebaran 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 Aldebaran Resources are associated (or correlated) with Cypress Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cypress Development Corp has no effect on the direction of Aldebaran Resources i.e., Aldebaran Resources and Cypress Development go up and down completely randomly.

Pair Corralation between Aldebaran Resources and Cypress Development

Assuming the 90 days horizon Aldebaran Resources is expected to generate 1.67 times less return on investment than Cypress Development. In addition to that, Aldebaran Resources is 1.08 times more volatile than Cypress Development Corp. It trades about 0.02 of its total potential returns per unit of risk. Cypress Development Corp is currently generating about 0.03 per unit of volatility. If you would invest  22.00  in Cypress Development Corp on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Cypress Development Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aldebaran Resources  vs.  Cypress Development Corp

Aldebaran Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldebaran Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aldebaran Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Cypress Development Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cypress Development Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cypress Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aldebaran Resources and Cypress Development

The main advantage of trading using opposite Aldebaran Resources and Cypress Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldebaran Resources position performs unexpectedly, Cypress Development 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 Cypress Development will offset losses from the drop in Cypress Development's long position.

The idea behind Aldebaran Resources and Cypress Development Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.