Correlation Between Leading Edge and Midnight Sun

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

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

Diversification Opportunities for Leading Edge and Midnight Sun

-0.56

Correlation Coefficient

Leading Edge  Midnight Sun

Excellent diversification

The 3 months correlation between Leading and Midnight is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Midnight Sun Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midnight Sun Mining and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Midnight Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midnight Sun Mining has no effect on the direction of Leading Edge i.e., Leading Edge and Midnight Sun go up and down completely randomly.

Pair Corralation between Leading Edge and Midnight Sun

Assuming the 90 days horizon Leading Edge is expected to generate 41.24 times less return on investment than Midnight Sun. But when comparing it to its historical volatility, Leading Edge Materials is 5.34 times less risky than Midnight Sun. It trades about 0.01 of its potential returns per unit of risk. Midnight Sun Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Midnight Sun Mining on September 29, 2024 and sell it today you would earn a total of  5.00  from holding Midnight Sun Mining or generate 10.64% return on investment over 90 days.

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

Leading Edge Materials  vs.  Midnight Sun Mining

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Midnight Sun Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Midnight Sun Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Midnight Sun showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leading Edge and Midnight Sun

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

The idea behind Leading Edge Materials and Midnight Sun 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.