Correlation Between Jervois Mining and Ridgestone Mining

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

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

Diversification Opportunities for Jervois Mining and Ridgestone Mining

0.06

Correlation Coefficient

Jervois Mining  Ridgestone Mining

Significant diversification

The 3 months correlation between Jervois and Ridgestone is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Jervois Mining and Ridgestone Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgestone Mining and Jervois Mining 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 Jervois Mining are associated (or correlated) with Ridgestone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgestone Mining has no effect on the direction of Jervois Mining i.e., Jervois Mining and Ridgestone Mining go up and down completely randomly.

Pair Corralation between Jervois Mining and Ridgestone Mining

Assuming the 90 days horizon Jervois Mining is expected to generate 4.47 times less return on investment than Ridgestone Mining. But when comparing it to its historical volatility, Jervois Mining is 2.38 times less risky than Ridgestone Mining. It trades about 0.05 of its potential returns per unit of risk. Ridgestone Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.12  in Ridgestone Mining on December 1, 2024 and sell it today you would earn a total of  1.17  from holding Ridgestone Mining or generate 28.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Jervois Mining  vs.  Ridgestone Mining

Jervois Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jervois Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Jervois Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Ridgestone Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ridgestone Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Ridgestone Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jervois Mining and Ridgestone Mining

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

The idea behind Jervois Mining and Ridgestone Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.