Correlation Between Pacific Bay and Orestone Mining

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

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

Diversification Opportunities for Pacific Bay and Orestone Mining

-0.29

Correlation Coefficient

Pacific Bay  Orestone Mining

Very good diversification

The 3 months correlation between Pacific and Orestone is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Bay Minerals and Orestone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orestone Mining Corp and Pacific Bay 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 Pacific Bay Minerals are associated (or correlated) with Orestone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orestone Mining Corp has no effect on the direction of Pacific Bay i.e., Pacific Bay and Orestone Mining go up and down completely randomly.

Pair Corralation between Pacific Bay and Orestone Mining

Assuming the 90 days horizon Pacific Bay Minerals is expected to generate 1.23 times more return on investment than Orestone Mining. However, Pacific Bay is 1.23 times more volatile than Orestone Mining Corp. It trades about 0.1 of its potential returns per unit of risk. Orestone Mining Corp is currently generating about 0.06 per unit of risk. If you would invest  4.00  in Pacific Bay Minerals on October 7, 2024 and sell it today you would earn a total of  1.00  from holding Pacific Bay Minerals or generate 25.0% return on investment over 90 days.

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

Pacific Bay Minerals  vs.  Orestone Mining Corp

Pacific Bay Minerals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Bay Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Pacific Bay showed solid returns over the last few months and may actually be approaching a breakup point.

Orestone Mining Corp

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Pacific Bay and Orestone Mining

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

The idea behind Pacific Bay Minerals and Orestone Mining 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.