Correlation Between North Peak and TRU Precious

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

By analyzing existing cross correlation between North Peak Resources and TRU Precious Metals, you can compare the effects of market volatilities on North Peak and TRU Precious 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 North Peak with a short position of TRU Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Peak and TRU Precious.

Diversification Opportunities for North Peak and TRU Precious

0.6

Correlation Coefficient

North Peak  TRU Precious

Poor diversification

The 3 months correlation between North and TRU is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding North Peak Resources and TRU Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRU Precious Metals and North Peak 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 North Peak Resources are associated (or correlated) with TRU Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRU Precious Metals has no effect on the direction of North Peak i.e., North Peak and TRU Precious go up and down completely randomly.

Pair Corralation between North Peak and TRU Precious

Assuming the 90 days horizon North Peak Resources is expected to under-perform the TRU Precious. But the pink sheet apears to be less risky and, when comparing its historical volatility, North Peak Resources is 1.94 times less risky than TRU Precious. The pink sheet trades about -0.05 of its potential returns per unit of risk. The TRU Precious Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.71  in TRU Precious Metals on September 11, 2024 and sell it today you would lose (0.53) from holding TRU Precious Metals or give up 30.99% of portfolio value over 90 days.

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

North Peak Resources  vs.  TRU Precious Metals

North Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential 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.

TRU Precious Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRU Precious Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, TRU Precious reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North Peak and TRU Precious

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

The idea behind North Peak Resources and TRU Precious Metals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..