Correlation Between Peak Minerals and Peak Resources

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

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

Diversification Opportunities for Peak Minerals and Peak Resources

0.77

Correlation Coefficient

Peak Minerals  Peak Resources

Poor diversification

The 3 months correlation between Peak and Peak is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Peak Minerals Limited and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak Resources and Peak Minerals 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 Peak Minerals Limited are associated (or correlated) with Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Peak Minerals i.e., Peak Minerals and Peak Resources go up and down completely randomly.

Pair Corralation between Peak Minerals and Peak Resources

Assuming the 90 days horizon Peak Minerals Limited is expected to generate 1.56 times more return on investment than Peak Resources. However, Peak Minerals is 1.56 times more volatile than Peak Resources Limited. It trades about 0.07 of its potential returns per unit of risk. Peak Resources Limited is currently generating about 0.03 per unit of risk. If you would invest  0.40  in Peak Minerals Limited on December 27, 2024 and sell it today you would earn a total of  0.05  from holding Peak Minerals Limited or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Peak Minerals Limited  vs.  Peak Resources Limited

Peak Minerals Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peak Minerals Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Peak Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Peak Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peak Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Peak Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peak Minerals and Peak Resources

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

The idea behind Peak Minerals Limited and Peak Resources 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.