Correlation Between Ophir Gold and Tectonic Metals

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

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

Diversification Opportunities for Ophir Gold and Tectonic Metals

0.76

Correlation Coefficient

Ophir Gold  Tectonic Metals

Poor diversification

The 3 months correlation between Ophir and Tectonic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ophir Gold Corp and Tectonic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tectonic Metals and Ophir Gold 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 Ophir Gold Corp are associated (or correlated) with Tectonic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tectonic Metals has no effect on the direction of Ophir Gold i.e., Ophir Gold and Tectonic Metals go up and down completely randomly.

Pair Corralation between Ophir Gold and Tectonic Metals

Assuming the 90 days trading horizon Ophir Gold is expected to generate 10.2 times less return on investment than Tectonic Metals. But when comparing it to its historical volatility, Ophir Gold Corp is 2.25 times less risky than Tectonic Metals. It trades about 0.02 of its potential returns per unit of risk. Tectonic Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.25  in Tectonic Metals on October 26, 2024 and sell it today you would earn a total of  0.25  from holding Tectonic Metals or generate 5.88% return on investment over 90 days.

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

Ophir Gold Corp  vs.  Tectonic Metals

Ophir Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ophir Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, Ophir Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tectonic Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tectonic Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ophir Gold and Tectonic Metals

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

The idea behind Ophir Gold Corp and Tectonic Metals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.