Correlation Between Red Pine and CANEX Metals

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

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

Diversification Opportunities for Red Pine and CANEX Metals

0.2

Correlation Coefficient

Red Pine  CANEX Metals

Modest diversification

The 3 months correlation between Red and CANEX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and CANEX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANEX Metals and Red Pine 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 Pine Exploration are associated (or correlated) with CANEX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANEX Metals has no effect on the direction of Red Pine i.e., Red Pine and CANEX Metals go up and down completely randomly.

Pair Corralation between Red Pine and CANEX Metals

Assuming the 90 days horizon Red Pine is expected to generate 9.61 times less return on investment than CANEX Metals. But when comparing it to its historical volatility, Red Pine Exploration is 2.13 times less risky than CANEX Metals. It trades about 0.02 of its potential returns per unit of risk. CANEX Metals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4.00  in CANEX Metals on December 27, 2024 and sell it today you would earn a total of  2.00  from holding CANEX Metals or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Red Pine Exploration  vs.  CANEX Metals

Red Pine Exploration

Risk-Adjusted Performance

Weak

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

CANEX Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CANEX Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CANEX Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Pine and CANEX Metals

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

The idea behind Red Pine Exploration and CANEX Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.