Correlation Between Huntsman Exploration and Boss Resources

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

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

Diversification Opportunities for Huntsman Exploration and Boss Resources

0.61

Correlation Coefficient

Huntsman Exploration  Boss Resources

Poor diversification

The 3 months correlation between Huntsman and Boss is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman Exploration and Boss Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boss Resources and Huntsman Exploration 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 Huntsman Exploration are associated (or correlated) with Boss Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boss Resources has no effect on the direction of Huntsman Exploration i.e., Huntsman Exploration and Boss Resources go up and down completely randomly.

Pair Corralation between Huntsman Exploration and Boss Resources

Assuming the 90 days horizon Huntsman Exploration is expected to generate 4.08 times more return on investment than Boss Resources. However, Huntsman Exploration is 4.08 times more volatile than Boss Resources. It trades about 0.11 of its potential returns per unit of risk. Boss Resources is currently generating about -0.03 per unit of risk. If you would invest  3.70  in Huntsman Exploration on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Huntsman Exploration or generate 54.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Huntsman Exploration  vs.  Boss Resources

Huntsman Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huntsman Exploration are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Huntsman Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Boss Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boss Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Huntsman Exploration and Boss Resources

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

The idea behind Huntsman Exploration and Boss 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.