Correlation Between Bushveld Minerals and Decade Resources

Can any of the company-specific risk be diversified away by investing in both Bushveld Minerals and Decade 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 Decade 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 Decade Resources, you can compare the effects of market volatilities on Bushveld Minerals and Decade 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 Decade Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bushveld Minerals and Decade Resources.

Diversification Opportunities for Bushveld Minerals and Decade Resources

-0.13

Correlation Coefficient

Bushveld Minerals  Decade Resources

Good diversification

The 3 months correlation between Bushveld and Decade is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bushveld Minerals Limited and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade 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 Decade Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decade Resources has no effect on the direction of Bushveld Minerals i.e., Bushveld Minerals and Decade Resources go up and down completely randomly.

Pair Corralation between Bushveld Minerals and Decade Resources

Assuming the 90 days horizon Bushveld Minerals Limited is expected to generate 19.34 times more return on investment than Decade Resources. However, Bushveld Minerals is 19.34 times more volatile than Decade Resources. It trades about 0.22 of its potential returns per unit of risk. Decade Resources is currently generating about 0.04 per unit of risk. If you would invest  0.80  in Bushveld Minerals Limited on September 4, 2024 and sell it today you would earn a total of  0.20  from holding Bushveld Minerals Limited or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bushveld Minerals Limited  vs.  Decade Resources

Bushveld Minerals

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 17 (%) 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.

Decade Resources

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Bushveld Minerals and Decade Resources

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

The idea behind Bushveld Minerals Limited and Decade 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.