Correlation Between Bell Copper and Highland Copper

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

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

Diversification Opportunities for Bell Copper and Highland Copper

0.26

Correlation Coefficient

Bell Copper  Highland Copper

Modest diversification

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

Pair Corralation between Bell Copper and Highland Copper

Assuming the 90 days horizon Bell Copper is expected to generate 3.85 times more return on investment than Highland Copper. However, Bell Copper is 3.85 times more volatile than Highland Copper. It trades about 0.03 of its potential returns per unit of risk. Highland Copper is currently generating about -0.09 per unit of risk. If you would invest  3.00  in Bell Copper on September 20, 2024 and sell it today you would lose (0.50) from holding Bell Copper or give up 16.67% of portfolio value over 90 days.

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

Bell Copper  vs.  Highland Copper

Bell Copper

Risk-Adjusted Performance

3 of 100

Insignificant

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

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bell Copper and Highland Copper

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

The idea behind Bell Copper and Highland Copper 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.