Correlation Between Magna Mining and Diversified Royalty

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

By analyzing existing cross correlation between Magna Mining and Diversified Royalty Corp, you can compare the effects of market volatilities on Magna Mining and Diversified Royalty 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 Diversified Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna Mining and Diversified Royalty.

Diversification Opportunities for Magna Mining and Diversified Royalty

0.0

Correlation Coefficient

Magna Mining  Diversified Royalty

Pay attention - limited upside

The 3 months correlation between Magna and Diversified is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and Diversified Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Royalty Corp 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 Diversified Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Royalty Corp has no effect on the direction of Magna Mining i.e., Magna Mining and Diversified Royalty go up and down completely randomly.

Pair Corralation between Magna Mining and Diversified Royalty

Assuming the 90 days trading horizon Magna Mining is expected to generate 4.97 times more return on investment than Diversified Royalty. However, Magna Mining is 4.97 times more volatile than Diversified Royalty Corp. It trades about 0.13 of its potential returns per unit of risk. Diversified Royalty Corp is currently generating about 0.01 per unit of risk. If you would invest  118.00  in Magna Mining on October 7, 2024 and sell it today you would earn a total of  35.00  from holding Magna Mining or generate 29.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Magna Mining  vs.  Diversified Royalty Corp

Magna Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 10 (%) 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.

Diversified Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Magna Mining and Diversified Royalty

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

The idea behind Magna Mining and Diversified Royalty Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.