Correlation Between Mountain Boy and Sego Resources

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

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

Diversification Opportunities for Mountain Boy and Sego Resources

0.33

Correlation Coefficient

Mountain Boy  Sego Resources

Weak diversification

The 3 months correlation between Mountain and Sego is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Boy Minerals and Sego Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sego Resources and Mountain Boy 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 Mountain Boy Minerals are associated (or correlated) with Sego Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sego Resources has no effect on the direction of Mountain Boy i.e., Mountain Boy and Sego Resources go up and down completely randomly.

Pair Corralation between Mountain Boy and Sego Resources

Assuming the 90 days horizon Mountain Boy Minerals is expected to generate 3.97 times more return on investment than Sego Resources. However, Mountain Boy is 3.97 times more volatile than Sego Resources. It trades about 0.14 of its potential returns per unit of risk. Sego Resources is currently generating about 0.23 per unit of risk. If you would invest  2.00  in Mountain Boy Minerals on October 12, 2024 and sell it today you would lose (0.50) from holding Mountain Boy Minerals or give up 25.0% of portfolio value over 90 days.

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

Mountain Boy Minerals  vs.  Sego Resources

Mountain Boy Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Boy Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mountain Boy showed solid returns over the last few months and may actually be approaching a breakup point.

Sego Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sego Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sego Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mountain Boy and Sego Resources

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

The idea behind Mountain Boy Minerals and Sego 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.