Correlation Between Vertical Exploration and Magna Mining

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

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

Diversification Opportunities for Vertical Exploration and Magna Mining

0.66

Correlation Coefficient

Vertical Exploration  Magna Mining

Poor diversification

The 3 months correlation between Vertical and Magna is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Exploration and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining and Vertical Exploration 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 Vertical Exploration are associated (or correlated) with Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Vertical Exploration i.e., Vertical Exploration and Magna Mining go up and down completely randomly.

Pair Corralation between Vertical Exploration and Magna Mining

Assuming the 90 days horizon Vertical Exploration is expected to generate 25.98 times less return on investment than Magna Mining. But when comparing it to its historical volatility, Vertical Exploration is 39.27 times less risky than Magna Mining. It trades about 0.13 of its potential returns per unit of risk. Magna Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Magna Mining on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Magna Mining or generate 16.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Vertical Exploration  vs.  Magna Mining

Vertical Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vertical Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vertical Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Magna Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Magna Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vertical Exploration and Magna Mining

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

The idea behind Vertical Exploration and Magna Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.