Correlation Between Prime Mining and Eskay Mining

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

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

Diversification Opportunities for Prime Mining and Eskay Mining

0.21

Correlation Coefficient

Prime Mining  Eskay Mining

Modest diversification

The 3 months correlation between Prime and Eskay is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Prime Mining Corp and Eskay Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eskay Mining Corp and Prime Mining 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 Mining Corp are associated (or correlated) with Eskay Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eskay Mining Corp has no effect on the direction of Prime Mining i.e., Prime Mining and Eskay Mining go up and down completely randomly.

Pair Corralation between Prime Mining and Eskay Mining

Assuming the 90 days horizon Prime Mining Corp is expected to generate 0.96 times more return on investment than Eskay Mining. However, Prime Mining Corp is 1.04 times less risky than Eskay Mining. It trades about -0.03 of its potential returns per unit of risk. Eskay Mining Corp is currently generating about -0.09 per unit of risk. If you would invest  155.00  in Prime Mining Corp on September 4, 2024 and sell it today you would lose (48.00) from holding Prime Mining Corp or give up 30.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Prime Mining Corp  vs.  Eskay Mining Corp

Prime Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Prime Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eskay Mining Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eskay Mining Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eskay Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prime Mining and Eskay Mining

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

The idea behind Prime Mining Corp and Eskay 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.