Correlation Between Bluestone Resources and Rackla Metals

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

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

Diversification Opportunities for Bluestone Resources and Rackla Metals

-0.16

Correlation Coefficient

Bluestone Resources  Rackla Metals

Good diversification

The 3 months correlation between Bluestone and Rackla is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bluestone Resources and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals and Bluestone 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 Bluestone Resources are associated (or correlated) with Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of Bluestone Resources i.e., Bluestone Resources and Rackla Metals go up and down completely randomly.

Pair Corralation between Bluestone Resources and Rackla Metals

Assuming the 90 days horizon Bluestone Resources is expected to generate 304.53 times less return on investment than Rackla Metals. But when comparing it to its historical volatility, Bluestone Resources is 19.57 times less risky than Rackla Metals. It trades about 0.01 of its potential returns per unit of risk. Rackla Metals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Rackla Metals on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Rackla Metals or generate 114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.74%
Values	Daily Returns

Bluestone Resources  vs.  Rackla Metals

Bluestone Resources

Risk-Adjusted Performance

Very Weak

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

Rackla Metals

Risk-Adjusted Performance

Good

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

Pair Trading with Bluestone Resources and Rackla Metals

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

The idea behind Bluestone Resources and Rackla Metals 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.