Correlation Between Big Rock and Themac Resources

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

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

Diversification Opportunities for Big Rock and Themac Resources

-0.01

Correlation Coefficient

Big Rock  Themac Resources

Good diversification

The 3 months correlation between Big and Themac is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Big Rock Brewery and Themac Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themac Resources and Big Rock 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 Big Rock Brewery are associated (or correlated) with Themac Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themac Resources has no effect on the direction of Big Rock i.e., Big Rock and Themac Resources go up and down completely randomly.

Pair Corralation between Big Rock and Themac Resources

Assuming the 90 days horizon Big Rock is expected to generate 129.17 times less return on investment than Themac Resources. But when comparing it to its historical volatility, Big Rock Brewery is 2.05 times less risky than Themac Resources. It trades about 0.01 of its potential returns per unit of risk. Themac Resources Group is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Themac Resources Group on October 11, 2024 and sell it today you would earn a total of  2.50  from holding Themac Resources Group or generate 100.0% return on investment over 90 days.

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

Big Rock Brewery  vs.  Themac Resources Group

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Themac Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Themac Resources Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Themac Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Rock and Themac Resources

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

The idea behind Big Rock Brewery and Themac Resources Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.