Correlation Between Coles and Truscott Mining

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

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

Diversification Opportunities for Coles and Truscott Mining

0.51

Correlation Coefficient

Coles  Truscott Mining

Very weak diversification

The 3 months correlation between Coles and Truscott is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Truscott Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truscott Mining Corp and Coles 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 Coles Group are associated (or correlated) with Truscott Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truscott Mining Corp has no effect on the direction of Coles i.e., Coles and Truscott Mining go up and down completely randomly.

Pair Corralation between Coles and Truscott Mining

Assuming the 90 days trading horizon Coles is expected to generate 2.86 times less return on investment than Truscott Mining. But when comparing it to its historical volatility, Coles Group is 2.94 times less risky than Truscott Mining. It trades about 0.19 of its potential returns per unit of risk. Truscott Mining Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7.80  in Truscott Mining Corp on October 25, 2024 and sell it today you would earn a total of  0.40  from holding Truscott Mining Corp or generate 5.13% return on investment over 90 days.

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

Coles Group  vs.  Truscott Mining Corp

Coles Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coles Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Coles is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Truscott Mining Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Truscott Mining Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Truscott Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Coles and Truscott Mining

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

The idea behind Coles Group and Truscott Mining 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.