Correlation Between Sherritt International and Red Moon

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

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

Diversification Opportunities for Sherritt International and Red Moon

0.44

Correlation Coefficient

Sherritt International  Red Moon

Very weak diversification

The 3 months correlation between Sherritt and Red is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sherritt International and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources and Sherritt International 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 Sherritt International are associated (or correlated) with Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Sherritt International i.e., Sherritt International and Red Moon go up and down completely randomly.

Pair Corralation between Sherritt International and Red Moon

Assuming the 90 days horizon Sherritt International is expected to generate 7.2 times more return on investment than Red Moon. However, Sherritt International is 7.2 times more volatile than Red Moon Resources. It trades about 0.06 of its potential returns per unit of risk. Red Moon Resources is currently generating about -0.08 per unit of risk. If you would invest  12.00  in Sherritt International on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Sherritt International or generate 0.0% return on investment over 90 days.

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

Sherritt International  vs.  Red Moon Resources

Sherritt International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sherritt International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Sherritt International reported solid returns over the last few months and may actually be approaching a breakup point.

Red Moon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Moon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sherritt International and Red Moon

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

The idea behind Sherritt International and Red Moon 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.