Correlation Between Roots Corp and Orla Mining

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

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

Diversification Opportunities for Roots Corp and Orla Mining

0.85

Correlation Coefficient

Roots Corp  Orla Mining

Very poor diversification

The 3 months correlation between Roots and Orla is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Roots Corp and Orla Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orla Mining and Roots Corp 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 Roots Corp are associated (or correlated) with Orla Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orla Mining has no effect on the direction of Roots Corp i.e., Roots Corp and Orla Mining go up and down completely randomly.

Pair Corralation between Roots Corp and Orla Mining

Assuming the 90 days trading horizon Roots Corp is expected to generate 1.52 times less return on investment than Orla Mining. But when comparing it to its historical volatility, Roots Corp is 1.09 times less risky than Orla Mining. It trades about 0.17 of its potential returns per unit of risk. Orla Mining is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  675.00  in Orla Mining on December 1, 2024 and sell it today you would earn a total of  338.00  from holding Orla Mining or generate 50.07% return on investment over 90 days.

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

Roots Corp  vs.  Orla Mining

Roots Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roots Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Roots Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Orla Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orla Mining are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Orla Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roots Corp and Orla Mining

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

The idea behind Roots Corp and Orla Mining 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.