Correlation Between Flinders Resources and Pacific Ridge

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

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

Diversification Opportunities for Flinders Resources and Pacific Ridge

-0.5

Correlation Coefficient

Flinders Resources  Pacific Ridge

Very good diversification

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

Pair Corralation between Flinders Resources and Pacific Ridge

Assuming the 90 days horizon Flinders Resources Limited is expected to generate 0.46 times more return on investment than Pacific Ridge. However, Flinders Resources Limited is 2.18 times less risky than Pacific Ridge. It trades about 0.15 of its potential returns per unit of risk. Pacific Ridge Exploration is currently generating about 0.02 per unit of risk. If you would invest  445.00  in Flinders Resources Limited on December 21, 2024 and sell it today you would earn a total of  147.00  from holding Flinders Resources Limited or generate 33.03% return on investment over 90 days.

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

Flinders Resources Limited  vs.  Pacific Ridge Exploration

Flinders Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flinders Resources Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Flinders Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pacific Ridge Exploration

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Ridge Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacific Ridge may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Flinders Resources and Pacific Ridge

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

The idea behind Flinders Resources Limited and Pacific Ridge Exploration 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.