Correlation Between Largo Resources and Solitario Exploration

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

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

Diversification Opportunities for Largo Resources and Solitario Exploration

0.16

Correlation Coefficient

Largo Resources  Solitario Exploration

Average diversification

The 3 months correlation between Largo and Solitario is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Largo Resources and Solitario Exploration Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitario Exploration and Largo 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 Largo Resources are associated (or correlated) with Solitario Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitario Exploration has no effect on the direction of Largo Resources i.e., Largo Resources and Solitario Exploration go up and down completely randomly.

Pair Corralation between Largo Resources and Solitario Exploration

Considering the 90-day investment horizon Largo Resources is expected to under-perform the Solitario Exploration. In addition to that, Largo Resources is 1.13 times more volatile than Solitario Exploration Royalty. It trades about -0.05 of its total potential returns per unit of risk. Solitario Exploration Royalty is currently generating about 0.06 per unit of volatility. If you would invest  61.00  in Solitario Exploration Royalty on November 28, 2024 and sell it today you would earn a total of  5.97  from holding Solitario Exploration Royalty or generate 9.79% return on investment over 90 days.

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

Largo Resources  vs.  Solitario Exploration Royalty

Largo Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Largo Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Solitario Exploration

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solitario Exploration Royalty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Solitario Exploration disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Largo Resources and Solitario Exploration

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

The idea behind Largo Resources and Solitario Exploration Royalty 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.