Correlation Between Sterling Metals and Durango Resources

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

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

Diversification Opportunities for Sterling Metals and Durango Resources

0.01

Correlation Coefficient

Sterling Metals  Durango Resources

Significant diversification

The 3 months correlation between Sterling and Durango is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Metals Corp and Durango Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durango Resources and Sterling Metals 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 Sterling Metals Corp are associated (or correlated) with Durango Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durango Resources has no effect on the direction of Sterling Metals i.e., Sterling Metals and Durango Resources go up and down completely randomly.

Pair Corralation between Sterling Metals and Durango Resources

Assuming the 90 days horizon Sterling Metals Corp is expected to generate 4.88 times more return on investment than Durango Resources. However, Sterling Metals is 4.88 times more volatile than Durango Resources. It trades about 0.06 of its potential returns per unit of risk. Durango Resources is currently generating about 0.08 per unit of risk. If you would invest  146.00  in Sterling Metals Corp on December 2, 2024 and sell it today you would lose (123.00) from holding Sterling Metals Corp or give up 84.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sterling Metals Corp  vs.  Durango Resources

Sterling Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Metals Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Sterling Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Durango Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Durango Resources are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Durango Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sterling Metals and Durango Resources

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

The idea behind Sterling Metals Corp and Durango 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.