Correlation Between Red Moon and Thunderstruck Resources

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

Diversification Opportunities for Red Moon and Thunderstruck Resources

-0.32

Correlation Coefficient

Red Moon  Thunderstruck Resources

Very good diversification

The 3 months correlation between Red and Thunderstruck is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Red Moon Resources and Thunderstruck Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunderstruck 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 Thunderstruck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunderstruck Resources has no effect on the direction of Red Moon i.e., Red Moon and Thunderstruck Resources go up and down completely randomly.

Pair Corralation between Red Moon and Thunderstruck Resources

Assuming the 90 days horizon Red Moon Resources is expected to generate 1.13 times more return on investment than Thunderstruck Resources. However, Red Moon is 1.13 times more volatile than Thunderstruck Resources. It trades about 0.0 of its potential returns per unit of risk. Thunderstruck Resources is currently generating about -0.02 per unit of risk. If you would invest  44.00  in Red Moon Resources on December 3, 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	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Red Moon Resources  vs.  Thunderstruck 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.

Thunderstruck Resources

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Red Moon Resources and Thunderstruck 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.