Correlation Between Red Mountain and Ambertech

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

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

Diversification Opportunities for Red Mountain and Ambertech

-0.16

Correlation Coefficient

Red Mountain  Ambertech

Good diversification

The 3 months correlation between Red and Ambertech is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Red Mountain Mining and Ambertech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambertech and Red Mountain 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 Mountain Mining are associated (or correlated) with Ambertech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambertech has no effect on the direction of Red Mountain i.e., Red Mountain and Ambertech go up and down completely randomly.

Pair Corralation between Red Mountain and Ambertech

Assuming the 90 days trading horizon Red Mountain Mining is expected to generate 3.09 times more return on investment than Ambertech. However, Red Mountain is 3.09 times more volatile than Ambertech. It trades about 0.03 of its potential returns per unit of risk. Ambertech is currently generating about -0.01 per unit of risk. If you would invest  4.37  in Red Mountain Mining on October 9, 2024 and sell it today you would lose (3.47) from holding Red Mountain Mining or give up 79.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Red Mountain Mining  vs.  Ambertech

Red Mountain Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Mountain Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Red Mountain unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ambertech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambertech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Red Mountain and Ambertech

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

The idea behind Red Mountain Mining and Ambertech 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.