Correlation Between Canadian Palladium and Scotch Creek

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

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

Diversification Opportunities for Canadian Palladium and Scotch Creek

-0.04

Correlation Coefficient

Canadian Palladium  Scotch Creek

Good diversification

The 3 months correlation between Canadian and Scotch is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Palladium Resources and Scotch Creek Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotch Creek Ventures and Canadian Palladium 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 Canadian Palladium Resources are associated (or correlated) with Scotch Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotch Creek Ventures has no effect on the direction of Canadian Palladium i.e., Canadian Palladium and Scotch Creek go up and down completely randomly.

Pair Corralation between Canadian Palladium and Scotch Creek

Assuming the 90 days horizon Canadian Palladium Resources is expected to under-perform the Scotch Creek. But the pink sheet apears to be less risky and, when comparing its historical volatility, Canadian Palladium Resources is 2.13 times less risky than Scotch Creek. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Scotch Creek Ventures is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.60  in Scotch Creek Ventures on December 30, 2024 and sell it today you would earn a total of  1.80  from holding Scotch Creek Ventures or generate 69.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Canadian Palladium Resources  vs.  Scotch Creek Ventures

Canadian Palladium

Risk-Adjusted Performance

Very Weak

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

Scotch Creek Ventures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scotch Creek Ventures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Scotch Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Palladium and Scotch Creek

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

The idea behind Canadian Palladium Resources and Scotch Creek Ventures 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.