Correlation Between Sokoman Minerals and Bonterra Resources

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

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

Diversification Opportunities for Sokoman Minerals and Bonterra Resources

0.19

Correlation Coefficient

Sokoman Minerals  Bonterra Resources

Average diversification

The 3 months correlation between Sokoman and Bonterra is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sokoman Minerals Corp and Bonterra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra Resources and Sokoman 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 Sokoman Minerals Corp are associated (or correlated) with Bonterra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Resources has no effect on the direction of Sokoman Minerals i.e., Sokoman Minerals and Bonterra Resources go up and down completely randomly.

Pair Corralation between Sokoman Minerals and Bonterra Resources

Assuming the 90 days horizon Sokoman Minerals Corp is expected to generate 2.08 times more return on investment than Bonterra Resources. However, Sokoman Minerals is 2.08 times more volatile than Bonterra Resources. It trades about 0.1 of its potential returns per unit of risk. Bonterra Resources is currently generating about 0.05 per unit of risk. If you would invest  2.50  in Sokoman Minerals Corp on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Sokoman Minerals Corp or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Sokoman Minerals Corp  vs.  Bonterra Resources

Sokoman Minerals Corp

Risk-Adjusted Performance

OK

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

Bonterra Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bonterra Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bonterra Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sokoman Minerals and Bonterra Resources

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

The idea behind Sokoman Minerals Corp and Bonterra 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.