Correlation Between ROKMASTER Resources and Diamond Fields

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

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

Diversification Opportunities for ROKMASTER Resources and Diamond Fields

0.3

Correlation Coefficient

ROKMASTER Resources  Diamond Fields

Weak diversification

The 3 months correlation between ROKMASTER and Diamond is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ROKMASTER Resources Corp and Diamond Fields Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Fields Resources and ROKMASTER Resources 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 ROKMASTER Resources Corp are associated (or correlated) with Diamond Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Fields Resources has no effect on the direction of ROKMASTER Resources i.e., ROKMASTER Resources and Diamond Fields go up and down completely randomly.

Pair Corralation between ROKMASTER Resources and Diamond Fields

Assuming the 90 days horizon ROKMASTER Resources Corp is expected to generate 1.44 times more return on investment than Diamond Fields. However, ROKMASTER Resources is 1.44 times more volatile than Diamond Fields Resources. It trades about 0.04 of its potential returns per unit of risk. Diamond Fields Resources is currently generating about 0.02 per unit of risk. If you would invest  2.50  in ROKMASTER Resources Corp on September 23, 2024 and sell it today you would lose (0.50) from holding ROKMASTER Resources Corp or give up 20.0% of portfolio value over 90 days.

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

ROKMASTER Resources Corp  vs.  Diamond Fields Resources

ROKMASTER Resources Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ROKMASTER Resources Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ROKMASTER Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Fields Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Fields Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Diamond Fields may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ROKMASTER Resources and Diamond Fields

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

The idea behind ROKMASTER Resources Corp and Diamond Fields 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.

Check out your portfolio center.

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.