Correlation Between Tarku Resources and US Financial

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

By analyzing existing cross correlation between Tarku Resources and US Financial 15, you can compare the effects of market volatilities on Tarku Resources and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tarku Resources and US Financial.

Diversification Opportunities for Tarku Resources and US Financial

-0.55

Correlation Coefficient

Tarku Resources  US Financial

Excellent diversification

The 3 months correlation between Tarku and FTU-PB is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tarku Resources and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Tarku Resources i.e., Tarku Resources and US Financial go up and down completely randomly.

Pair Corralation between Tarku Resources and US Financial

Assuming the 90 days horizon Tarku Resources is expected to generate 9.45 times more return on investment than US Financial. However, Tarku Resources is 9.45 times more volatile than US Financial 15. It trades about 0.09 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.09 per unit of risk. If you would invest  1.50  in Tarku Resources on October 4, 2024 and sell it today you would earn a total of  0.00  from holding Tarku Resources or generate 0.0% return on investment over 90 days.

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

Tarku Resources  vs.  US Financial 15

Tarku Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tarku Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Tarku Resources showed solid returns over the last few months and may actually be approaching a breakup point.

US Financial 15

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, US Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tarku Resources and US Financial

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

The idea behind Tarku Resources and US Financial 15 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.