Correlation Between Red Pine and Aurion Resources

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

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

Diversification Opportunities for Red Pine and Aurion Resources

0.76

Correlation Coefficient

Red Pine  Aurion Resources

Poor diversification

The 3 months correlation between Red and Aurion is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Aurion Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurion Resources and Red Pine 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 Red Pine Exploration are associated (or correlated) with Aurion Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurion Resources has no effect on the direction of Red Pine i.e., Red Pine and Aurion Resources go up and down completely randomly.

Pair Corralation between Red Pine and Aurion Resources

Assuming the 90 days horizon Red Pine Exploration is expected to generate 1.52 times more return on investment than Aurion Resources. However, Red Pine is 1.52 times more volatile than Aurion Resources. It trades about 0.01 of its potential returns per unit of risk. Aurion Resources is currently generating about 0.02 per unit of risk. If you would invest  8.69  in Red Pine Exploration on August 30, 2024 and sell it today you would lose (0.27) from holding Red Pine Exploration or give up 3.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Red Pine Exploration  vs.  Aurion Resources

Red Pine Exploration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Pine Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Red Pine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aurion Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurion Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aurion Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Red Pine and Aurion Resources

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

The idea behind Red Pine Exploration and Aurion 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.