Correlation Between Prime Mining and Globex Mining

Can any of the company-specific risk be diversified away by investing in both Prime Mining and Globex 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 Globex 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 Globex Mining Enterprises, you can compare the effects of market volatilities on Prime Mining and Globex 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 Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Mining and Globex Mining.

Diversification Opportunities for Prime Mining and Globex Mining

0.12

Correlation Coefficient

Prime Mining  Globex Mining

Average diversification

The 3 months correlation between Prime and Globex is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Prime Mining Corp and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of Prime Mining i.e., Prime Mining and Globex Mining go up and down completely randomly.

Pair Corralation between Prime Mining and Globex Mining

Assuming the 90 days horizon Prime Mining is expected to generate 1.72 times less return on investment than Globex Mining. In addition to that, Prime Mining is 1.68 times more volatile than Globex Mining Enterprises. It trades about 0.02 of its total potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.05 per unit of volatility. If you would invest  49.00  in Globex Mining Enterprises on September 13, 2024 and sell it today you would earn a total of  28.00  from holding Globex Mining Enterprises or generate 57.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Prime Mining Corp  vs.  Globex Mining Enterprises

Prime Mining Corp

Risk-Adjusted Performance

5 of 100

Modest

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

Globex Mining Enterprises

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Globex Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Mining and Globex Mining

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

The idea behind Prime Mining Corp and Globex Mining Enterprises 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.