Correlation Between Thor Mining and Somero Enterprise

Can any of the company-specific risk be diversified away by investing in both Thor Mining and Somero Enterprise 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 Thor Mining and Somero Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thor Mining PLC and Somero Enterprise, you can compare the effects of market volatilities on Thor Mining and Somero Enterprise 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 Thor Mining with a short position of Somero Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thor Mining and Somero Enterprise.

Diversification Opportunities for Thor Mining and Somero Enterprise

-0.62

Correlation Coefficient

Thor Mining  Somero Enterprise

Excellent diversification

The 3 months correlation between Thor and Somero is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Thor Mining PLC and Somero Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somero Enterprise and Thor Mining 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 Thor Mining PLC are associated (or correlated) with Somero Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somero Enterprise has no effect on the direction of Thor Mining i.e., Thor Mining and Somero Enterprise go up and down completely randomly.

Pair Corralation between Thor Mining and Somero Enterprise

Assuming the 90 days trading horizon Thor Mining PLC is expected to generate 2.37 times more return on investment than Somero Enterprise. However, Thor Mining is 2.37 times more volatile than Somero Enterprise. It trades about -0.04 of its potential returns per unit of risk. Somero Enterprise is currently generating about -0.28 per unit of risk. If you would invest  70.00  in Thor Mining PLC on October 26, 2024 and sell it today you would lose (2.00) from holding Thor Mining PLC or give up 2.86% of portfolio value over 90 days.

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

Thor Mining PLC  vs.  Somero Enterprise

Thor Mining PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Mining PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Somero Enterprise

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Somero Enterprise are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Somero Enterprise exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thor Mining and Somero Enterprise

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

The idea behind Thor Mining PLC and Somero Enterprise 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.