Correlation Between Decade Resources and Stroud Resources

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

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

Diversification Opportunities for Decade Resources and Stroud Resources

0.82

Correlation Coefficient

Decade Resources  Stroud Resources

Very poor diversification

The 3 months correlation between Decade and Stroud is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Decade Resources and Stroud Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stroud Resources and Decade 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 Decade Resources are associated (or correlated) with Stroud Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stroud Resources has no effect on the direction of Decade Resources i.e., Decade Resources and Stroud Resources go up and down completely randomly.

Pair Corralation between Decade Resources and Stroud Resources

Assuming the 90 days horizon Decade Resources is expected to under-perform the Stroud Resources. But the stock apears to be less risky and, when comparing its historical volatility, Decade Resources is 1.82 times less risky than Stroud Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Stroud Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Stroud Resources on October 10, 2024 and sell it today you would lose (4.00) from holding Stroud Resources or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Decade Resources  vs.  Stroud Resources

Decade Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decade Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Stroud Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stroud Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Decade Resources and Stroud Resources

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

The idea behind Decade Resources and Stroud Resources 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.