Correlation Between Sego Resources and Mountain Boy

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

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

Diversification Opportunities for Sego Resources and Mountain Boy

0.33

Correlation Coefficient

Sego Resources  Mountain Boy

Weak diversification

The 3 months correlation between Sego and Mountain is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sego Resources and Mountain Boy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Boy Minerals and Sego 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 Sego Resources are associated (or correlated) with Mountain Boy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Boy Minerals has no effect on the direction of Sego Resources i.e., Sego Resources and Mountain Boy go up and down completely randomly.

Pair Corralation between Sego Resources and Mountain Boy

Assuming the 90 days horizon Sego Resources is expected to generate 0.9 times more return on investment than Mountain Boy. However, Sego Resources is 1.11 times less risky than Mountain Boy. It trades about 0.04 of its potential returns per unit of risk. Mountain Boy Minerals is currently generating about 0.03 per unit of risk. If you would invest  3.00  in Sego Resources on October 27, 2024 and sell it today you would lose (1.00) from holding Sego Resources or give up 33.33% of portfolio value over 90 days.

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

Sego Resources  vs.  Mountain Boy Minerals

Sego Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mountain Boy Minerals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Boy Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mountain Boy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sego Resources and Mountain Boy

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

The idea behind Sego Resources and Mountain Boy Minerals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.