Correlation Between Energy Resources and Mantle Minerals

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

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

Diversification Opportunities for Energy Resources and Mantle Minerals

0.08

Correlation Coefficient

Energy Resources  Mantle Minerals

Significant diversification

The 3 months correlation between Energy and Mantle is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Mantle Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mantle Minerals and Energy 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 Energy Resources are associated (or correlated) with Mantle Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mantle Minerals has no effect on the direction of Energy Resources i.e., Energy Resources and Mantle Minerals go up and down completely randomly.

Pair Corralation between Energy Resources and Mantle Minerals

Assuming the 90 days trading horizon Energy Resources is expected to generate 2.98 times less return on investment than Mantle Minerals. In addition to that, Energy Resources is 1.12 times more volatile than Mantle Minerals Limited. It trades about 0.02 of its total potential returns per unit of risk. Mantle Minerals Limited is currently generating about 0.08 per unit of volatility. If you would invest  0.20  in Mantle Minerals Limited on September 5, 2024 and sell it today you would lose (0.05) from holding Mantle Minerals Limited or give up 25.0% of portfolio value over 90 days.

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

Energy Resources  vs.  Mantle Minerals Limited

Energy Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mantle Minerals

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mantle Minerals Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Mantle Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Resources and Mantle Minerals

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

The idea behind Energy Resources and Mantle Minerals Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.