Correlation Between Red Pine and Goldbank Mining

Can any of the company-specific risk be diversified away by investing in both Red Pine and Goldbank 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 Red Pine and Goldbank Mining 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 Goldbank Mining Corp, you can compare the effects of market volatilities on Red Pine and Goldbank 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 Red Pine with a short position of Goldbank Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Pine and Goldbank Mining.

Diversification Opportunities for Red Pine and Goldbank Mining

0.38

Correlation Coefficient

Red Pine  Goldbank Mining

Weak diversification

The 3 months correlation between Red and Goldbank is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Goldbank Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldbank Mining Corp 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 Goldbank Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldbank Mining Corp has no effect on the direction of Red Pine i.e., Red Pine and Goldbank Mining go up and down completely randomly.

Pair Corralation between Red Pine and Goldbank Mining

Assuming the 90 days horizon Red Pine is expected to generate 1.92 times less return on investment than Goldbank Mining. In addition to that, Red Pine is 2.5 times more volatile than Goldbank Mining Corp. It trades about 0.02 of its total potential returns per unit of risk. Goldbank Mining Corp is currently generating about 0.09 per unit of volatility. If you would invest  18.00  in Goldbank Mining Corp on December 3, 2024 and sell it today you would earn a total of  1.00  from holding Goldbank Mining Corp or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Red Pine Exploration  vs.  Goldbank Mining Corp

Red Pine Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Pine Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Red Pine is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Goldbank Mining Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldbank Mining Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Goldbank Mining is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Red Pine and Goldbank Mining

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

The idea behind Red Pine Exploration and Goldbank Mining Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.