Correlation Between Morien Resources and Laurentian Bank

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

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

Diversification Opportunities for Morien Resources and Laurentian Bank

-0.67

Correlation Coefficient

Morien Resources  Laurentian Bank

Excellent diversification

The 3 months correlation between Morien and Laurentian is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Morien Resources Corp and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and Morien 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 Morien Resources Corp are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Morien Resources i.e., Morien Resources and Laurentian Bank go up and down completely randomly.

Pair Corralation between Morien Resources and Laurentian Bank

Assuming the 90 days horizon Morien Resources Corp is expected to generate 4.31 times more return on investment than Laurentian Bank. However, Morien Resources is 4.31 times more volatile than Laurentian Bank. It trades about 0.1 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.0 per unit of risk. If you would invest  28.00  in Morien Resources Corp on November 20, 2024 and sell it today you would earn a total of  7.00  from holding Morien Resources Corp or generate 25.0% return on investment over 90 days.

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

Morien Resources Corp  vs.  Laurentian Bank

Morien Resources Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morien Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Morien Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Laurentian Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laurentian Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Laurentian Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Morien Resources and Laurentian Bank

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

The idea behind Morien Resources Corp and Laurentian Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.