Correlation Between Bradda Head and Strategic Resources

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

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

Diversification Opportunities for Bradda Head and Strategic Resources

0.48

Correlation Coefficient

Bradda Head  Strategic Resources

Very weak diversification

The 3 months correlation between Bradda and Strategic is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bradda Head Lithium and Strategic Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Resources and Bradda Head 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 Bradda Head Lithium are associated (or correlated) with Strategic Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Resources has no effect on the direction of Bradda Head i.e., Bradda Head and Strategic Resources go up and down completely randomly.

Pair Corralation between Bradda Head and Strategic Resources

Assuming the 90 days horizon Bradda Head Lithium is expected to generate 5.38 times more return on investment than Strategic Resources. However, Bradda Head is 5.38 times more volatile than Strategic Resources. It trades about 0.01 of its potential returns per unit of risk. Strategic Resources is currently generating about -0.12 per unit of risk. If you would invest  1.30  in Bradda Head Lithium on December 30, 2024 and sell it today you would lose (0.20) from holding Bradda Head Lithium or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Bradda Head Lithium  vs.  Strategic Resources

Bradda Head Lithium

Risk-Adjusted Performance

Very Weak

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

Strategic Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental 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 Bradda Head and Strategic Resources

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

The idea behind Bradda Head Lithium and Strategic 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.