Correlation Between Rathdowney Resources and PJX Resources

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

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

Diversification Opportunities for Rathdowney Resources and PJX Resources

0.18

Correlation Coefficient

Rathdowney Resources  PJX Resources

Average diversification

The 3 months correlation between Rathdowney and PJX is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Rathdowney Resources and PJX Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJX Resources and Rathdowney 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 Rathdowney Resources are associated (or correlated) with PJX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJX Resources has no effect on the direction of Rathdowney Resources i.e., Rathdowney Resources and PJX Resources go up and down completely randomly.

Pair Corralation between Rathdowney Resources and PJX Resources

Assuming the 90 days horizon Rathdowney Resources is expected to generate 1.91 times more return on investment than PJX Resources. However, Rathdowney Resources is 1.91 times more volatile than PJX Resources. It trades about 0.15 of its potential returns per unit of risk. PJX Resources is currently generating about 0.1 per unit of risk. If you would invest  1.00  in Rathdowney Resources on December 1, 2024 and sell it today you would earn a total of  1.50  from holding Rathdowney Resources or generate 150.0% return on investment over 90 days.

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

Rathdowney Resources  vs.  PJX Resources

Rathdowney Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rathdowney Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rathdowney Resources showed solid returns over the last few months and may actually be approaching a breakup point.

PJX Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PJX Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, PJX Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rathdowney Resources and PJX Resources

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

The idea behind Rathdowney Resources and PJX Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.