Correlation Between Copper Lake and Monarca Minerals

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

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

Diversification Opportunities for Copper Lake and Monarca Minerals

0.0

Correlation Coefficient

Copper Lake  Monarca Minerals

Pay attention - limited upside

The 3 months correlation between Copper and Monarca is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Copper Lake Resources and Monarca Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarca Minerals and Copper Lake 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 Copper Lake Resources are associated (or correlated) with Monarca Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarca Minerals has no effect on the direction of Copper Lake i.e., Copper Lake and Monarca Minerals go up and down completely randomly.

Pair Corralation between Copper Lake and Monarca Minerals

Assuming the 90 days horizon Copper Lake is expected to generate 1.77 times less return on investment than Monarca Minerals. But when comparing it to its historical volatility, Copper Lake Resources is 1.21 times less risky than Monarca Minerals. It trades about 0.06 of its potential returns per unit of risk. Monarca Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Monarca Minerals on September 23, 2024 and sell it today you would lose (1.00) from holding Monarca Minerals or give up 50.0% of portfolio value over 90 days.

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

Copper Lake Resources  vs.  Monarca Minerals

Copper Lake Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copper Lake Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Copper Lake showed solid returns over the last few months and may actually be approaching a breakup point.

Monarca Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Copper Lake and Monarca Minerals

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

The idea behind Copper Lake Resources and Monarca Minerals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.