Correlation Between Black Widow and Mammoth Resources

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

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

Diversification Opportunities for Black Widow and Mammoth Resources

0.55

Correlation Coefficient

Black Widow  Mammoth Resources

Very weak diversification

The 3 months correlation between Black and Mammoth is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Black Widow Resources and Mammoth Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mammoth Resources Corp and Black Widow 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 Black Widow Resources are associated (or correlated) with Mammoth Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mammoth Resources Corp has no effect on the direction of Black Widow i.e., Black Widow and Mammoth Resources go up and down completely randomly.

Pair Corralation between Black Widow and Mammoth Resources

Assuming the 90 days horizon Black Widow Resources is expected to under-perform the Mammoth Resources. But the stock apears to be less risky and, when comparing its historical volatility, Black Widow Resources is 1.42 times less risky than Mammoth Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Mammoth Resources Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Mammoth Resources Corp on October 10, 2024 and sell it today you would lose (0.50) from holding Mammoth Resources Corp or give up 25.0% of portfolio value over 90 days.

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

Black Widow Resources  vs.  Mammoth Resources Corp

Black Widow Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Widow Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Mammoth Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mammoth Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mammoth Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Black Widow and Mammoth Resources

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

The idea behind Black Widow Resources and Mammoth Resources Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..