Correlation Between Pampa Metals and Recharge Resources

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

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

Diversification Opportunities for Pampa Metals and Recharge Resources

-0.17

Correlation Coefficient

Pampa Metals  Recharge Resources

Good diversification

The 3 months correlation between Pampa and Recharge is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Metals and Recharge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recharge Resources and Pampa Metals 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 Pampa Metals are associated (or correlated) with Recharge Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recharge Resources has no effect on the direction of Pampa Metals i.e., Pampa Metals and Recharge Resources go up and down completely randomly.

Pair Corralation between Pampa Metals and Recharge Resources

Assuming the 90 days horizon Pampa Metals is expected to generate 40.14 times less return on investment than Recharge Resources. But when comparing it to its historical volatility, Pampa Metals is 13.47 times less risky than Recharge Resources. It trades about 0.04 of its potential returns per unit of risk. Recharge Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4.56  in Recharge Resources on December 29, 2024 and sell it today you would earn a total of  3.32  from holding Recharge Resources or generate 72.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Pampa Metals  vs.  Recharge Resources

Pampa Metals

Risk-Adjusted Performance

Insignificant

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

Recharge Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Recharge Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Recharge Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pampa Metals and Recharge Resources

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

The idea behind Pampa Metals and Recharge 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.