Correlation Between Silver Range and Loncor Resources

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

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

Diversification Opportunities for Silver Range and Loncor Resources

0.19

Correlation Coefficient

Silver Range  Loncor Resources

Average diversification

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

Pair Corralation between Silver Range and Loncor Resources

Assuming the 90 days horizon Silver Range Resources is expected to generate 2.71 times more return on investment than Loncor Resources. However, Silver Range is 2.71 times more volatile than Loncor Resources. It trades about 0.04 of its potential returns per unit of risk. Loncor Resources is currently generating about 0.08 per unit of risk. If you would invest  8.00  in Silver Range Resources on September 23, 2024 and sell it today you would lose (1.00) from holding Silver Range Resources or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Silver Range Resources  vs.  Loncor Resources

Silver Range Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Loncor Resources

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Silver Range and Loncor Resources

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

The idea behind Silver Range Resources and Loncor 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.