Correlation Between IMetal Resources and Stroud Resources

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

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

Diversification Opportunities for IMetal Resources and Stroud Resources

0.01

Correlation Coefficient

IMetal Resources  Stroud Resources

Significant diversification

The 3 months correlation between IMetal and Stroud is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding iMetal Resources and Stroud Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stroud Resources and IMetal 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 iMetal Resources are associated (or correlated) with Stroud Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stroud Resources has no effect on the direction of IMetal Resources i.e., IMetal Resources and Stroud Resources go up and down completely randomly.

Pair Corralation between IMetal Resources and Stroud Resources

Assuming the 90 days horizon IMetal Resources is expected to generate 2.32 times less return on investment than Stroud Resources. But when comparing it to its historical volatility, iMetal Resources is 1.55 times less risky than Stroud Resources. It trades about 0.04 of its potential returns per unit of risk. Stroud Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Stroud Resources on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Stroud Resources or generate 0.0% return on investment over 90 days.

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

iMetal Resources  vs.  Stroud Resources

iMetal Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iMetal Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IMetal Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Stroud Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stroud Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Stroud Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMetal Resources and Stroud Resources

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

The idea behind iMetal Resources and Stroud Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.