Correlation Between ROK Resources and Touchstone Exploration

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

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

Diversification Opportunities for ROK Resources and Touchstone Exploration

0.37

Correlation Coefficient

ROK Resources  Touchstone Exploration

Weak diversification

The 3 months correlation between ROK and Touchstone is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources and Touchstone Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Exploration and ROK 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 ROK Resources are associated (or correlated) with Touchstone Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Exploration has no effect on the direction of ROK Resources i.e., ROK Resources and Touchstone Exploration go up and down completely randomly.

Pair Corralation between ROK Resources and Touchstone Exploration

Assuming the 90 days horizon ROK Resources is expected to under-perform the Touchstone Exploration. In addition to that, ROK Resources is 1.34 times more volatile than Touchstone Exploration. It trades about -0.05 of its total potential returns per unit of risk. Touchstone Exploration is currently generating about -0.02 per unit of volatility. If you would invest  42.00  in Touchstone Exploration on September 3, 2024 and sell it today you would lose (3.00) from holding Touchstone Exploration or give up 7.14% of portfolio value over 90 days.

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

ROK Resources  vs.  Touchstone Exploration

ROK Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROK Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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.

Touchstone Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Touchstone Exploration is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ROK Resources and Touchstone Exploration

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

The idea behind ROK Resources and Touchstone Exploration 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.