Correlation Between Tarku Resources and PHN Canadian

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

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

Diversification Opportunities for Tarku Resources and PHN Canadian

-0.13

Correlation Coefficient

Tarku Resources  PHN Canadian

Good diversification

The 3 months correlation between Tarku and PHN is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tarku Resources and PHN Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHN Canadian Equity and Tarku Resources 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 Tarku Resources are associated (or correlated) with PHN Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHN Canadian Equity has no effect on the direction of Tarku Resources i.e., Tarku Resources and PHN Canadian go up and down completely randomly.

Pair Corralation between Tarku Resources and PHN Canadian

Assuming the 90 days horizon Tarku Resources is expected to generate 24.2 times more return on investment than PHN Canadian. However, Tarku Resources is 24.2 times more volatile than PHN Canadian Equity. It trades about 0.04 of its potential returns per unit of risk. PHN Canadian Equity is currently generating about 0.06 per unit of risk. If you would invest  1.50  in Tarku Resources on December 30, 2024 and sell it today you would lose (0.50) from holding Tarku Resources or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tarku Resources  vs.  PHN Canadian Equity

Tarku Resources

Risk-Adjusted Performance

Insignificant

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

PHN Canadian Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Canadian Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, PHN Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tarku Resources and PHN Canadian

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

The idea behind Tarku Resources and PHN Canadian Equity 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.