Correlation Between Monarca Minerals and Northern Graphite

Can any of the company-specific risk be diversified away by investing in both Monarca Minerals and Northern Graphite 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 Monarca Minerals and Northern Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Monarca Minerals and Northern Graphite

-0.23

Correlation Coefficient

Monarca Minerals  Northern Graphite

Very good diversification

The 3 months correlation between Monarca and Northern is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Monarca Minerals and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite and Monarca Minerals 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 Monarca Minerals are associated (or correlated) with Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of Monarca Minerals i.e., Monarca Minerals and Northern Graphite go up and down completely randomly.

Pair Corralation between Monarca Minerals and Northern Graphite

Assuming the 90 days horizon Monarca Minerals is expected to under-perform the Northern Graphite. But the stock apears to be less risky and, when comparing its historical volatility, Monarca Minerals is 1.27 times less risky than Northern Graphite. The stock trades about -0.22 of its potential returns per unit of risk. The Northern Graphite is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Northern Graphite on September 29, 2024 and sell it today you would earn a total of  6.50  from holding Northern Graphite or generate 76.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Monarca Minerals  vs.  Northern Graphite

Monarca Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monarca Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Northern Graphite

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Graphite are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Northern Graphite showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monarca Minerals and Northern Graphite

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

The idea behind Monarca Minerals and Northern Graphite 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 CEOs Directory module to screen CEOs from public companies around the world.