Correlation Between CopperCorp Resources and Bell Copper

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

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

Diversification Opportunities for CopperCorp Resources and Bell Copper

-0.22

Correlation Coefficient

CopperCorp Resources  Bell Copper

Very good diversification

The 3 months correlation between CopperCorp and Bell is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CopperCorp Resources and Bell Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bell Copper and CopperCorp Resources 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 CopperCorp Resources are associated (or correlated) with Bell Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bell Copper has no effect on the direction of CopperCorp Resources i.e., CopperCorp Resources and Bell Copper go up and down completely randomly.

Pair Corralation between CopperCorp Resources and Bell Copper

Assuming the 90 days horizon CopperCorp Resources is expected to generate 1.66 times more return on investment than Bell Copper. However, CopperCorp Resources is 1.66 times more volatile than Bell Copper. It trades about 0.06 of its potential returns per unit of risk. Bell Copper is currently generating about 0.02 per unit of risk. If you would invest  13.00  in CopperCorp Resources on December 7, 2024 and sell it today you would lose (6.72) from holding CopperCorp Resources or give up 51.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

CopperCorp Resources  vs.  Bell Copper

CopperCorp Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days CopperCorp Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CopperCorp Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bell Copper

Risk-Adjusted Performance

Weak

Over the last 90 days Bell Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Bell Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CopperCorp Resources and Bell Copper

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

The idea behind CopperCorp Resources and Bell Copper 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.