Correlation Between BCM Resources and Edison Cobalt

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

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

Diversification Opportunities for BCM Resources and Edison Cobalt

-0.26

Correlation Coefficient

BCM Resources  Edison Cobalt

Very good diversification

The 3 months correlation between BCM and Edison is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding BCM Resources and Edison Cobalt Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison Cobalt Corp and BCM 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 BCM Resources are associated (or correlated) with Edison Cobalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison Cobalt Corp has no effect on the direction of BCM Resources i.e., BCM Resources and Edison Cobalt go up and down completely randomly.

Pair Corralation between BCM Resources and Edison Cobalt

Assuming the 90 days horizon BCM Resources is expected to generate 0.84 times more return on investment than Edison Cobalt. However, BCM Resources is 1.19 times less risky than Edison Cobalt. It trades about 0.04 of its potential returns per unit of risk. Edison Cobalt Corp is currently generating about 0.03 per unit of risk. If you would invest  4.00  in BCM Resources on September 4, 2024 and sell it today you would lose (0.47) from holding BCM Resources or give up 11.75% of portfolio value over 90 days.

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

BCM Resources  vs.  Edison Cobalt Corp

BCM Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCM Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BCM Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Edison Cobalt Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edison Cobalt Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Edison Cobalt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCM Resources and Edison Cobalt

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

The idea behind BCM Resources and Edison Cobalt 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.