Correlation Between RT Minerals and Talon Metals

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

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

Diversification Opportunities for RT Minerals and Talon Metals

0.39

Correlation Coefficient

RT Minerals  Talon Metals

Weak diversification

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

Pair Corralation between RT Minerals and Talon Metals

Assuming the 90 days horizon RT Minerals Corp is expected to under-perform the Talon Metals. But the stock apears to be less risky and, when comparing its historical volatility, RT Minerals Corp is 1.05 times less risky than Talon Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Talon Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Talon Metals Corp on September 15, 2024 and sell it today you would earn a total of  0.50  from holding Talon Metals Corp or generate 5.56% return on investment over 90 days.

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

RT Minerals Corp  vs.  Talon Metals Corp

RT Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Talon Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talon Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Talon Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RT Minerals and Talon Metals

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

The idea behind RT Minerals Corp and Talon Metals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..