Correlation Between Pardee Resources and Tejon Ranch

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

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

Diversification Opportunities for Pardee Resources and Tejon Ranch

-0.51

Correlation Coefficient

Pardee Resources  Tejon Ranch

Excellent diversification

The 3 months correlation between Pardee and Tejon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pardee Resources Co and Tejon Ranch Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tejon Ranch and Pardee Resources 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 Pardee Resources Co are associated (or correlated) with Tejon Ranch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tejon Ranch has no effect on the direction of Pardee Resources i.e., Pardee Resources and Tejon Ranch go up and down completely randomly.

Pair Corralation between Pardee Resources and Tejon Ranch

Given the investment horizon of 90 days Pardee Resources Co is expected to generate 0.68 times more return on investment than Tejon Ranch. However, Pardee Resources Co is 1.46 times less risky than Tejon Ranch. It trades about 0.33 of its potential returns per unit of risk. Tejon Ranch Co is currently generating about -0.23 per unit of risk. If you would invest  30,621  in Pardee Resources Co on September 12, 2024 and sell it today you would earn a total of  2,879  from holding Pardee Resources Co or generate 9.4% return on investment over 90 days.

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

Pardee Resources Co  vs.  Tejon Ranch Co

Pardee Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pardee Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tejon Ranch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tejon Ranch Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Pardee Resources and Tejon Ranch

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

The idea behind Pardee Resources Co and Tejon Ranch Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.