Correlation Between Rockridge Resources and Vital Metals

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

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

Diversification Opportunities for Rockridge Resources and Vital Metals

-0.39

Correlation Coefficient

Rockridge Resources  Vital Metals

Very good diversification

The 3 months correlation between Rockridge and Vital is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rockridge Resources and Vital Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Metals Limited and Rockridge 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 Rockridge Resources are associated (or correlated) with Vital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Metals Limited has no effect on the direction of Rockridge Resources i.e., Rockridge Resources and Vital Metals go up and down completely randomly.

Pair Corralation between Rockridge Resources and Vital Metals

Assuming the 90 days horizon Rockridge Resources is expected to generate 7.37 times less return on investment than Vital Metals. But when comparing it to its historical volatility, Rockridge Resources is 4.84 times less risky than Vital Metals. It trades about 0.1 of its potential returns per unit of risk. Vital Metals Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Vital Metals Limited on December 30, 2024 and sell it today you would earn a total of  0.08  from holding Vital Metals Limited or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.65%
Values	Daily Returns

Rockridge Resources  vs.  Vital Metals Limited

Rockridge Resources

Risk-Adjusted Performance

OK

Over the last 90 days Rockridge Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile essential indicators, Rockridge Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Vital Metals Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Metals Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vital Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rockridge Resources and Vital Metals

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

The idea behind Rockridge Resources and Vital Metals Limited 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.