Correlation Between Prime Meridian and Hudson Resources

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

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

Diversification Opportunities for Prime Meridian and Hudson Resources

0.23

Correlation Coefficient

Prime Meridian  Hudson Resources

Modest diversification

The 3 months correlation between Prime and Hudson is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Prime Meridian Resources and Hudson Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Resources and Prime Meridian 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 Prime Meridian Resources are associated (or correlated) with Hudson Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Resources has no effect on the direction of Prime Meridian i.e., Prime Meridian and Hudson Resources go up and down completely randomly.

Pair Corralation between Prime Meridian and Hudson Resources

Assuming the 90 days horizon Prime Meridian Resources is expected to under-perform the Hudson Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Prime Meridian Resources is 2.63 times less risky than Hudson Resources. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Hudson Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Hudson Resources on November 29, 2024 and sell it today you would earn a total of  0.11  from holding Hudson Resources or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Prime Meridian Resources  vs.  Hudson Resources

Prime Meridian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prime Meridian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hudson Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hudson Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Meridian and Hudson Resources

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

The idea behind Prime Meridian Resources and Hudson 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.