Correlation Between Diamond Fields and Spectral Med

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

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

Diversification Opportunities for Diamond Fields and Spectral Med

0.69

Correlation Coefficient

Diamond Fields  Spectral Med

Poor diversification

The 3 months correlation between Diamond and Spectral is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Fields Resources and Spectral Med in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectral Med and Diamond Fields 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 Diamond Fields Resources are associated (or correlated) with Spectral Med. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectral Med has no effect on the direction of Diamond Fields i.e., Diamond Fields and Spectral Med go up and down completely randomly.

Pair Corralation between Diamond Fields and Spectral Med

Assuming the 90 days horizon Diamond Fields Resources is expected to under-perform the Spectral Med. In addition to that, Diamond Fields is 2.6 times more volatile than Spectral Med. It trades about -0.08 of its total potential returns per unit of risk. Spectral Med is currently generating about -0.01 per unit of volatility. If you would invest  57.00  in Spectral Med on October 6, 2024 and sell it today you would lose (3.00) from holding Spectral Med or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Diamond Fields Resources  vs.  Spectral Med

Diamond Fields Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Fields 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.

Spectral Med

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectral Med has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Spectral Med is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Diamond Fields and Spectral Med

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

The idea behind Diamond Fields Resources and Spectral Med 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.