Correlation Between Alpha Metallurgical and Ramaco Resources

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

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

Diversification Opportunities for Alpha Metallurgical and Ramaco Resources

0.58

Correlation Coefficient

Alpha Metallurgical  Ramaco Resources

Very weak diversification

The 3 months correlation between Alpha and Ramaco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Metallurgical Resources and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources and Alpha Metallurgical 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 Alpha Metallurgical Resources are associated (or correlated) with Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Alpha Metallurgical i.e., Alpha Metallurgical and Ramaco Resources go up and down completely randomly.

Pair Corralation between Alpha Metallurgical and Ramaco Resources

Considering the 90-day investment horizon Alpha Metallurgical Resources is expected to under-perform the Ramaco Resources. But the stock apears to be less risky and, when comparing its historical volatility, Alpha Metallurgical Resources is 2.15 times less risky than Ramaco Resources. The stock trades about -0.21 of its potential returns per unit of risk. The Ramaco Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Ramaco Resources on December 28, 2024 and sell it today you would lose (154.00) from holding Ramaco Resources or give up 15.4% of portfolio value over 90 days.

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

Alpha Metallurgical Resources  vs.  Ramaco Resources

Alpha Metallurgical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Metallurgical Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ramaco Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ramaco Resources is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alpha Metallurgical and Ramaco Resources

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

The idea behind Alpha Metallurgical Resources and Ramaco 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.