Correlation Between O3 Mining and Canstar Resources

Can any of the company-specific risk be diversified away by investing in both O3 Mining and Canstar 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 O3 Mining and Canstar Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between O3 Mining and Canstar Resources, you can compare the effects of market volatilities on O3 Mining and Canstar 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 O3 Mining with a short position of Canstar Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of O3 Mining and Canstar Resources.

Diversification Opportunities for O3 Mining and Canstar Resources

0.26

Correlation Coefficient

O3 Mining  Canstar Resources

Modest diversification

The 3 months correlation between OIIIF and Canstar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding O3 Mining and Canstar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canstar Resources and O3 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 O3 Mining are associated (or correlated) with Canstar Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canstar Resources has no effect on the direction of O3 Mining i.e., O3 Mining and Canstar Resources go up and down completely randomly.

Pair Corralation between O3 Mining and Canstar Resources

Assuming the 90 days horizon O3 Mining is expected to under-perform the Canstar Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, O3 Mining is 10.74 times less risky than Canstar Resources. The otc stock trades about -0.04 of its potential returns per unit of risk. The Canstar Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Canstar Resources on December 29, 2024 and sell it today you would earn a total of  0.93  from holding Canstar Resources or generate 37.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

O3 Mining  vs.  Canstar Resources

O3 Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days O3 Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, O3 Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Canstar Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canstar Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canstar Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with O3 Mining and Canstar Resources

The main advantage of trading using opposite O3 Mining and Canstar Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if O3 Mining position performs unexpectedly, Canstar 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 Canstar Resources will offset losses from the drop in Canstar Resources' long position.

The idea behind O3 Mining and Canstar 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.