Correlation Between Laurentian Bank and Homerun Resources

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

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

Diversification Opportunities for Laurentian Bank and Homerun Resources

0.31

Correlation Coefficient

Laurentian Bank  Homerun Resources

Weak diversification

The 3 months correlation between Laurentian and Homerun is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and Homerun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homerun Resources and Laurentian Bank 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 Laurentian Bank are associated (or correlated) with Homerun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homerun Resources has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and Homerun Resources go up and down completely randomly.

Pair Corralation between Laurentian Bank and Homerun Resources

Assuming the 90 days horizon Laurentian Bank is expected to generate 6.82 times less return on investment than Homerun Resources. But when comparing it to its historical volatility, Laurentian Bank is 4.14 times less risky than Homerun Resources. It trades about 0.07 of its potential returns per unit of risk. Homerun Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Homerun Resources on October 9, 2024 and sell it today you would earn a total of  70.00  from holding Homerun Resources or generate 140.0% return on investment over 90 days.

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

Laurentian Bank  vs.  Homerun Resources

Laurentian Bank

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laurentian Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Homerun Resources

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Homerun Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Laurentian Bank and Homerun Resources

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

The idea behind Laurentian Bank and Homerun 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.