Correlation Between Magna Mining and Boss Resources

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

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

Diversification Opportunities for Magna Mining and Boss Resources

0.77

Correlation Coefficient

Magna Mining  Boss Resources

Poor diversification

The 3 months correlation between Magna and Boss is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and Boss Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boss Resources and Magna Mining 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 Magna Mining are associated (or correlated) with Boss Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boss Resources has no effect on the direction of Magna Mining i.e., Magna Mining and Boss Resources go up and down completely randomly.

Pair Corralation between Magna Mining and Boss Resources

Assuming the 90 days horizon Magna Mining is expected to generate 0.9 times more return on investment than Boss Resources. However, Magna Mining is 1.11 times less risky than Boss Resources. It trades about 0.06 of its potential returns per unit of risk. Boss Resources is currently generating about -0.03 per unit of risk. If you would invest  106.00  in Magna Mining on December 1, 2024 and sell it today you would earn a total of  10.00  from holding Magna Mining or generate 9.43% return on investment over 90 days.

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

Magna Mining  vs.  Boss Resources

Magna Mining

Risk-Adjusted Performance

Insignificant

Over the last 90 days Magna Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Magna Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Boss Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boss Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Magna Mining and Boss Resources

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

The idea behind Magna Mining and Boss 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.