Correlation Between Search Minerals and Boliden AB

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

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

Diversification Opportunities for Search Minerals and Boliden AB

0.31

Correlation Coefficient

Search Minerals  Boliden AB

Weak diversification

The 3 months correlation between Search and Boliden is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Search Minerals and Boliden AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB ADR and Search 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 Search Minerals are associated (or correlated) with Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB ADR has no effect on the direction of Search Minerals i.e., Search Minerals and Boliden AB go up and down completely randomly.

Pair Corralation between Search Minerals and Boliden AB

Assuming the 90 days horizon Search Minerals is expected to generate 3.92 times more return on investment than Boliden AB. However, Search Minerals is 3.92 times more volatile than Boliden AB ADR. It trades about 0.09 of its potential returns per unit of risk. Boliden AB ADR is currently generating about 0.15 per unit of risk. If you would invest  1.20  in Search Minerals on December 29, 2024 and sell it today you would earn a total of  0.43  from holding Search Minerals or generate 35.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Search Minerals  vs.  Boliden AB ADR

Search Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Search Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Search Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Boliden AB ADR

Risk-Adjusted Performance

Good

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

Pair Trading with Search Minerals and Boliden AB

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

The idea behind Search Minerals and Boliden AB ADR 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.