Correlation Between Foothills Exploration and Black Dragon

Can any of the company-specific risk be diversified away by investing in both Foothills Exploration and Black Dragon 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 Foothills Exploration and Black Dragon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Foothills Exploration and Black Dragon Resource, you can compare the effects of market volatilities on Foothills Exploration and Black Dragon 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 Foothills Exploration with a short position of Black Dragon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foothills Exploration and Black Dragon.

Diversification Opportunities for Foothills Exploration and Black Dragon

1.0

Correlation Coefficient

Foothills Exploration  Black Dragon

No risk reduction

The 3 months correlation between Foothills and Black is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Foothills Exploration and Black Dragon Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Dragon Resource and Foothills Exploration 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 Foothills Exploration are associated (or correlated) with Black Dragon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Dragon Resource has no effect on the direction of Foothills Exploration i.e., Foothills Exploration and Black Dragon go up and down completely randomly.

Pair Corralation between Foothills Exploration and Black Dragon

Given the investment horizon of 90 days Foothills Exploration is expected to generate 7.11 times less return on investment than Black Dragon. But when comparing it to its historical volatility, Foothills Exploration is 5.5 times less risky than Black Dragon. It trades about 0.11 of its potential returns per unit of risk. Black Dragon Resource is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Black Dragon Resource on October 25, 2024 and sell it today you would earn a total of  0.01  from holding Black Dragon Resource or generate 9.223372036854776E16% return on investment over 90 days.

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

Foothills Exploration  vs.  Black Dragon Resource

Foothills Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Black Dragon Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Dragon Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Black Dragon is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Foothills Exploration and Black Dragon

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

The idea behind Foothills Exploration and Black Dragon Resource 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.