Correlation Between Canstar Resources and Prime Mining

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

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

Diversification Opportunities for Canstar Resources and Prime Mining

-0.21

Correlation Coefficient

Canstar Resources  Prime Mining

Very good diversification

The 3 months correlation between Canstar and Prime is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Canstar Resources and Prime Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Mining Corp and Canstar 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 Canstar Resources are associated (or correlated) with Prime Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Mining Corp has no effect on the direction of Canstar Resources i.e., Canstar Resources and Prime Mining go up and down completely randomly.

Pair Corralation between Canstar Resources and Prime Mining

Assuming the 90 days horizon Canstar Resources is expected to generate 1.98 times more return on investment than Prime Mining. However, Canstar Resources is 1.98 times more volatile than Prime Mining Corp. It trades about 0.1 of its potential returns per unit of risk. Prime Mining Corp is currently generating about 0.07 per unit of risk. If you would invest  2.50  in Canstar Resources on December 29, 2024 and sell it today you would earn a total of  0.93  from holding Canstar Resources or generate 37.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Canstar Resources  vs.  Prime Mining Corp

Canstar Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canstar Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canstar Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Prime Mining Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Mining Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prime Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canstar Resources and Prime Mining

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

The idea behind Canstar Resources and Prime 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.