Correlation Between Palamina Corp and Ximen Mining

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

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

Diversification Opportunities for Palamina Corp and Ximen Mining

-0.16

Correlation Coefficient

Palamina Corp  Ximen Mining

Good diversification

The 3 months correlation between Palamina and Ximen is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Palamina Corp and Ximen Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ximen Mining Corp and Palamina Corp 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 Palamina Corp are associated (or correlated) with Ximen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ximen Mining Corp has no effect on the direction of Palamina Corp i.e., Palamina Corp and Ximen Mining go up and down completely randomly.

Pair Corralation between Palamina Corp and Ximen Mining

Assuming the 90 days horizon Palamina Corp is expected to generate 5.5 times less return on investment than Ximen Mining. But when comparing it to its historical volatility, Palamina Corp is 2.36 times less risky than Ximen Mining. It trades about 0.04 of its potential returns per unit of risk. Ximen Mining Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Ximen Mining Corp on December 29, 2024 and sell it today you would earn a total of  3.50  from holding Ximen Mining Corp or generate 53.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Palamina Corp  vs.  Ximen Mining Corp

Palamina Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Palamina Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Palamina Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Ximen Mining Corp

Risk-Adjusted Performance

OK

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

Pair Trading with Palamina Corp and Ximen Mining

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

The idea behind Palamina Corp and Ximen 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.