Correlation Between Emerald Resources and Truscott Mining

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

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

Diversification Opportunities for Emerald Resources and Truscott Mining

0.42

Correlation Coefficient

Emerald Resources  Truscott Mining

Very weak diversification

The 3 months correlation between Emerald and Truscott is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Emerald Resources NL and Truscott Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truscott Mining Corp and Emerald 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 Emerald Resources NL are associated (or correlated) with Truscott Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truscott Mining Corp has no effect on the direction of Emerald Resources i.e., Emerald Resources and Truscott Mining go up and down completely randomly.

Pair Corralation between Emerald Resources and Truscott Mining

Assuming the 90 days trading horizon Emerald Resources is expected to generate 41.5 times less return on investment than Truscott Mining. But when comparing it to its historical volatility, Emerald Resources NL is 1.88 times less risky than Truscott Mining. It trades about 0.01 of its potential returns per unit of risk. Truscott Mining Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Truscott Mining Corp on September 12, 2024 and sell it today you would earn a total of  1.80  from holding Truscott Mining Corp or generate 30.0% return on investment over 90 days.

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

Emerald Resources NL  vs.  Truscott Mining Corp

Emerald Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerald Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Emerald Resources is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Truscott Mining Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truscott Mining Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Truscott Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerald Resources and Truscott Mining

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

The idea behind Emerald Resources NL and Truscott Mining Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.