Correlation Between Red Pine and Irving Resources

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

Diversification Opportunities for Red Pine and Irving Resources

0.08

Correlation Coefficient

Red Pine  Irving Resources

Significant diversification

The 3 months correlation between Red and Irving is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Irving Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Irving 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 Irving Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Irving Resources has no effect on the direction of Red Pine i.e., Red Pine and Irving Resources go up and down completely randomly.

Pair Corralation between Red Pine and Irving Resources

Assuming the 90 days horizon Red Pine is expected to generate 2.82 times less return on investment than Irving Resources. But when comparing it to its historical volatility, Red Pine Exploration is 1.23 times less risky than Irving Resources. It trades about 0.02 of its potential returns per unit of risk. Irving Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Irving Resources on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Irving Resources or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Red Pine Exploration  vs.  Irving Resources

Red Pine Exploration

Risk-Adjusted Performance

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 fragile basic indicators, Red Pine may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Irving Resources

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Red Pine and Irving Resources

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

The idea behind Red Pine Exploration and Irving 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.