Correlation Between Bushveld Minerals and Ascendant Resources

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

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

Diversification Opportunities for Bushveld Minerals and Ascendant Resources

0.08

Correlation Coefficient

Bushveld Minerals  Ascendant Resources

Significant diversification

The 3 months correlation between Bushveld and Ascendant is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bushveld Minerals Limited and Ascendant Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendant Resources and Bushveld Minerals 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 Bushveld Minerals Limited are associated (or correlated) with Ascendant Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendant Resources has no effect on the direction of Bushveld Minerals i.e., Bushveld Minerals and Ascendant Resources go up and down completely randomly.

Pair Corralation between Bushveld Minerals and Ascendant Resources

Assuming the 90 days horizon Bushveld Minerals Limited is expected to generate 21.92 times more return on investment than Ascendant Resources. However, Bushveld Minerals is 21.92 times more volatile than Ascendant Resources. It trades about 0.31 of its potential returns per unit of risk. Ascendant Resources is currently generating about 0.09 per unit of risk. If you would invest  1.00  in Bushveld Minerals Limited on December 1, 2024 and sell it today you would lose (0.60) from holding Bushveld Minerals Limited or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Bushveld Minerals Limited  vs.  Ascendant Resources

Bushveld Minerals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bushveld Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Ascendant Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ascendant Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ascendant Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bushveld Minerals and Ascendant Resources

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

The idea behind Bushveld Minerals Limited and Ascendant 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.