Correlation Between Decade Resources and Ultra Resources

Can any of the company-specific risk be diversified away by investing in both Decade Resources and Ultra 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 Ultra 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 Ultra Resources, you can compare the effects of market volatilities on Decade Resources and Ultra 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 Ultra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Decade Resources and Ultra Resources.

Diversification Opportunities for Decade Resources and Ultra Resources

0.5

Correlation Coefficient

Decade Resources  Ultra Resources

Very weak diversification

The 3 months correlation between Decade and Ultra is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Decade Resources and Ultra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra 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 Ultra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Resources has no effect on the direction of Decade Resources i.e., Decade Resources and Ultra Resources go up and down completely randomly.

Pair Corralation between Decade Resources and Ultra Resources

Assuming the 90 days horizon Decade Resources is expected to under-perform the Ultra Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Decade Resources is 2.18 times less risky than Ultra Resources. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Ultra Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Ultra Resources on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Ultra Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Decade Resources  vs.  Ultra 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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ultra Resources

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Decade Resources and Ultra Resources

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

The idea behind Decade Resources and Ultra 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.