Correlation Between Themac Resources and New Pacific

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

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

Diversification Opportunities for Themac Resources and New Pacific

-0.44

Correlation Coefficient

Themac Resources  New Pacific

Very good diversification

The 3 months correlation between Themac and New is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Themac Resources Group and New Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Pacific Metals and Themac 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 Themac Resources Group are associated (or correlated) with New Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Pacific Metals has no effect on the direction of Themac Resources i.e., Themac Resources and New Pacific go up and down completely randomly.

Pair Corralation between Themac Resources and New Pacific

Assuming the 90 days horizon Themac Resources Group is expected to generate 3.0 times more return on investment than New Pacific. However, Themac Resources is 3.0 times more volatile than New Pacific Metals. It trades about 0.24 of its potential returns per unit of risk. New Pacific Metals is currently generating about -0.43 per unit of risk. If you would invest  2.50  in Themac Resources Group on September 29, 2024 and sell it today you would earn a total of  1.00  from holding Themac Resources Group or generate 40.0% return on investment over 90 days.

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

Themac Resources Group  vs.  New Pacific Metals

Themac Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Themac Resources Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Themac Resources showed solid returns over the last few months and may actually be approaching a breakup point.

New Pacific Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Themac Resources and New Pacific

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

The idea behind Themac Resources Group and New Pacific Metals 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.