Correlation Between Midnight Sun and Leading Edge

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

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

Diversification Opportunities for Midnight Sun and Leading Edge

-0.03

Correlation Coefficient

Midnight Sun  Leading Edge

Good diversification

The 3 months correlation between Midnight and Leading is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Midnight Sun Mining and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Midnight Sun 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 Midnight Sun Mining are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Midnight Sun i.e., Midnight Sun and Leading Edge go up and down completely randomly.

Pair Corralation between Midnight Sun and Leading Edge

Assuming the 90 days horizon Midnight Sun is expected to generate 2.59 times less return on investment than Leading Edge. But when comparing it to its historical volatility, Midnight Sun Mining is 1.94 times less risky than Leading Edge. It trades about 0.09 of its potential returns per unit of risk. Leading Edge Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Leading Edge Materials on December 30, 2024 and sell it today you would earn a total of  4.50  from holding Leading Edge Materials or generate 52.94% return on investment over 90 days.

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

Midnight Sun Mining  vs.  Leading Edge Materials

Midnight Sun Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Midnight Sun Mining are ranked lower than 6 (%) 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.

Leading Edge Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leading Edge Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Leading Edge showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Midnight Sun and Leading Edge

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

The idea behind Midnight Sun Mining and Leading Edge Materials 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.