Correlation Between Aurwest Resources and Red Moon

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

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

Diversification Opportunities for Aurwest Resources and Red Moon

0.0

Correlation Coefficient

Aurwest Resources  Red Moon

Pay attention - limited upside

The 3 months correlation between Aurwest and Red is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aurwest Resources and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources and Aurwest 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 Aurwest Resources are associated (or correlated) with Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Aurwest Resources i.e., Aurwest Resources and Red Moon go up and down completely randomly.

Pair Corralation between Aurwest Resources and Red Moon

If you would invest  44.00  in Red Moon Resources on December 2, 2024 and sell it today you would lose (1.00) from holding Red Moon Resources or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.35%
Values	Daily Returns

Aurwest Resources  vs.  Red Moon Resources

Aurwest Resources

Risk-Adjusted Performance

Very Weak

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

Red Moon Resources

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aurwest Resources and Red Moon

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

The idea behind Aurwest Resources and Red Moon 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.