Correlation Between Magna Mining and Brunswick Exploration

Can any of the company-specific risk be diversified away by investing in both Magna Mining and Brunswick Exploration 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 Magna Mining and Brunswick Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Magna Mining and Brunswick Exploration

-0.67

Correlation Coefficient

Magna Mining  Brunswick Exploration

Excellent diversification

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

Pair Corralation between Magna Mining and Brunswick Exploration

Assuming the 90 days trading horizon Magna Mining is expected to generate 1.87 times less return on investment than Brunswick Exploration. But when comparing it to its historical volatility, Magna Mining is 2.03 times less risky than Brunswick Exploration. It trades about 0.07 of its potential returns per unit of risk. Brunswick Exploration is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Brunswick Exploration on September 22, 2024 and sell it today you would earn a total of  2.00  from holding Brunswick Exploration or generate 14.29% return on investment over 90 days.

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

Magna Mining  vs.  Brunswick Exploration

Magna Mining

Risk-Adjusted Performance

5 of 100

Modest

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

Brunswick Exploration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Brunswick Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magna Mining and Brunswick Exploration

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

The idea behind Magna Mining and Brunswick Exploration 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.