Correlation Between Searchlight Resources and Posera

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

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

Diversification Opportunities for Searchlight Resources and Posera

0.75

Correlation Coefficient

Searchlight Resources  Posera

Poor diversification

The 3 months correlation between Searchlight and Posera is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Searchlight Resources and Posera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posera and Searchlight 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 Searchlight Resources are associated (or correlated) with Posera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posera has no effect on the direction of Searchlight Resources i.e., Searchlight Resources and Posera go up and down completely randomly.

Pair Corralation between Searchlight Resources and Posera

Assuming the 90 days horizon Searchlight Resources is expected to generate 1.71 times more return on investment than Posera. However, Searchlight Resources is 1.71 times more volatile than Posera. It trades about 0.0 of its potential returns per unit of risk. Posera is currently generating about -0.16 per unit of risk. If you would invest  0.84  in Searchlight Resources on September 3, 2024 and sell it today you would lose (0.48) from holding Searchlight Resources or give up 57.14% of portfolio value over 90 days.

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

Searchlight Resources  vs.  Posera

Searchlight Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Searchlight Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Searchlight Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Posera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Posera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Searchlight Resources and Posera

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

The idea behind Searchlight Resources and Posera 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.

Check out your portfolio center.

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.