Correlation Between Rimrock Gold and Livewire Ergogenics

Can any of the company-specific risk be diversified away by investing in both Rimrock Gold and Livewire Ergogenics 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 Rimrock Gold and Livewire Ergogenics into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Rimrock Gold and Livewire Ergogenics

-0.42

Correlation Coefficient

Rimrock Gold  Livewire Ergogenics

Very good diversification

The 3 months correlation between Rimrock and Livewire is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rimrock Gold Corp and Livewire Ergogenics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livewire Ergogenics and Rimrock Gold 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 Rimrock Gold Corp are associated (or correlated) with Livewire Ergogenics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livewire Ergogenics has no effect on the direction of Rimrock Gold i.e., Rimrock Gold and Livewire Ergogenics go up and down completely randomly.

Pair Corralation between Rimrock Gold and Livewire Ergogenics

Given the investment horizon of 90 days Rimrock Gold Corp is expected to generate 1.05 times more return on investment than Livewire Ergogenics. However, Rimrock Gold is 1.05 times more volatile than Livewire Ergogenics. It trades about 0.1 of its potential returns per unit of risk. Livewire Ergogenics is currently generating about -0.02 per unit of risk. If you would invest  0.03  in Rimrock Gold Corp on November 29, 2024 and sell it today you would earn a total of  0.01  from holding Rimrock Gold Corp or generate 33.33% return on investment over 90 days.

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

Rimrock Gold Corp  vs.  Livewire Ergogenics

Rimrock Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rimrock Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Rimrock Gold disclosed solid returns over the last few months and may actually be approaching a breakup point.

Livewire Ergogenics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Livewire Ergogenics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Rimrock Gold and Livewire Ergogenics

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

The idea behind Rimrock Gold Corp and Livewire Ergogenics 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.