Correlation Between Red Moon and Surge Copper

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

Diversification Opportunities for Red Moon and Surge Copper

0.83

Correlation Coefficient

Red Moon  Surge Copper

Very poor diversification

The 3 months correlation between Red and Surge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Red Moon Resources and Surge Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Copper Corp 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 Surge Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Copper Corp has no effect on the direction of Red Moon i.e., Red Moon and Surge Copper go up and down completely randomly.

Pair Corralation between Red Moon and Surge Copper

Assuming the 90 days horizon Red Moon Resources is expected to generate 0.37 times more return on investment than Surge Copper. However, Red Moon Resources is 2.72 times less risky than Surge Copper. It trades about -0.08 of its potential returns per unit of risk. Surge Copper Corp is currently generating about -0.1 per unit of risk. If you would invest  48.00  in Red Moon Resources on September 13, 2024 and sell it today you would lose (2.00) from holding Red Moon Resources or give up 4.17% of portfolio value over 90 days.

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

Red Moon Resources  vs.  Surge Copper Corp

Red Moon Resources

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Surge Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Red Moon and Surge Copper

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

The idea behind Red Moon Resources and Surge Copper 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.