Correlation Between Lotus Resources and Talisman Mining

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

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

Diversification Opportunities for Lotus Resources and Talisman Mining

0.57

Correlation Coefficient

Lotus Resources  Talisman Mining

Very weak diversification

The 3 months correlation between Lotus and Talisman is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Resources and Talisman Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talisman Mining and Lotus 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 Lotus Resources are associated (or correlated) with Talisman Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talisman Mining has no effect on the direction of Lotus Resources i.e., Lotus Resources and Talisman Mining go up and down completely randomly.

Pair Corralation between Lotus Resources and Talisman Mining

Assuming the 90 days trading horizon Lotus Resources is expected to generate 1.64 times more return on investment than Talisman Mining. However, Lotus Resources is 1.64 times more volatile than Talisman Mining. It trades about 0.03 of its potential returns per unit of risk. Talisman Mining is currently generating about -0.1 per unit of risk. If you would invest  23.00  in Lotus Resources on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Lotus Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Lotus Resources  vs.  Talisman Mining

Lotus Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lotus Resources is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Talisman Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talisman Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Talisman Mining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lotus Resources and Talisman Mining

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

The idea behind Lotus Resources and Talisman 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.