Correlation Between Niobay Metals and Red Moon

Can any of the company-specific risk be diversified away by investing in both Niobay Metals and Red Moon 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 Niobay Metals and Red Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Niobay Metals and Red Moon

0.34

Correlation Coefficient

Niobay Metals  Red Moon

Weak diversification

The 3 months correlation between Niobay and Red is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Niobay Metals and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources and Niobay Metals 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 Niobay Metals are associated (or correlated) with Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Niobay Metals i.e., Niobay Metals and Red Moon go up and down completely randomly.

Pair Corralation between Niobay Metals and Red Moon

Assuming the 90 days horizon Niobay Metals is expected to generate 5.13 times more return on investment than Red Moon. However, Niobay Metals is 5.13 times more volatile than Red Moon Resources. It trades about 0.05 of its potential returns per unit of risk. Red Moon Resources is currently generating about -0.05 per unit of risk. If you would invest  6.00  in Niobay Metals on September 5, 2024 and sell it today you would lose (1.00) from holding Niobay Metals or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Niobay Metals  vs.  Red Moon Resources

Niobay Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Niobay Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Niobay Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Red Moon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Moon 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 Niobay Metals and Red Moon

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

The idea behind Niobay Metals and Red Moon 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.