Correlation Between Red Moon and Aurwest Resources

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

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

Diversification Opportunities for Red Moon and Aurwest Resources

0.0

Correlation Coefficient

Red Moon  Aurwest Resources

Pay attention - limited upside

The 3 months correlation between Red and Aurwest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Red Moon Resources and Aurwest Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurwest Resources and Red Moon 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 Moon Resources are associated (or correlated) with Aurwest Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurwest Resources has no effect on the direction of Red Moon i.e., Red Moon and Aurwest Resources go up and down completely randomly.

Pair Corralation between Red Moon and Aurwest Resources

If you would invest  44.00  in Red Moon Resources on December 2, 2024 and sell it today you would lose (1.00) from holding Red Moon Resources or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.35%
Values	Daily Returns

Red Moon Resources  vs.  Aurwest Resources

Red Moon Resources

Risk-Adjusted Performance

Very Weak

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

Aurwest Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aurwest Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aurwest 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 Moon and Aurwest Resources

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

The idea behind Red Moon Resources and Aurwest 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.