Correlation Between Intrepid Metals and Lotus Resources

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

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

Diversification Opportunities for Intrepid Metals and Lotus Resources

-0.45

Correlation Coefficient

Intrepid Metals  Lotus Resources

Very good diversification

The 3 months correlation between Intrepid and Lotus is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Intrepid Metals Corp and Lotus Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Resources and Intrepid Metals 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 Intrepid Metals Corp are associated (or correlated) with Lotus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Resources has no effect on the direction of Intrepid Metals i.e., Intrepid Metals and Lotus Resources go up and down completely randomly.

Pair Corralation between Intrepid Metals and Lotus Resources

Assuming the 90 days horizon Intrepid Metals Corp is expected to generate 1.06 times more return on investment than Lotus Resources. However, Intrepid Metals is 1.06 times more volatile than Lotus Resources Limited. It trades about 0.08 of its potential returns per unit of risk. Lotus Resources Limited is currently generating about -0.03 per unit of risk. If you would invest  28.00  in Intrepid Metals Corp on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Intrepid Metals Corp or generate 21.43% return on investment over 90 days.

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

Intrepid Metals Corp  vs.  Lotus Resources Limited

Intrepid Metals Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Intrepid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Lotus Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotus Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Intrepid Metals and Lotus Resources

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

The idea behind Intrepid Metals Corp and Lotus 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.