Correlation Between Talon Metals and Stampede Drilling

Can any of the company-specific risk be diversified away by investing in both Talon Metals and Stampede Drilling 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 Talon Metals and Stampede Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Talon Metals and Stampede Drilling

0.47

Correlation Coefficient

Talon Metals  Stampede Drilling

Very weak diversification

The 3 months correlation between Talon and Stampede is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Stampede Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stampede Drilling and Talon Metals 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 Talon Metals Corp are associated (or correlated) with Stampede Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stampede Drilling has no effect on the direction of Talon Metals i.e., Talon Metals and Stampede Drilling go up and down completely randomly.

Pair Corralation between Talon Metals and Stampede Drilling

Assuming the 90 days trading horizon Talon Metals Corp is expected to under-perform the Stampede Drilling. In addition to that, Talon Metals is 1.26 times more volatile than Stampede Drilling. It trades about -0.06 of its total potential returns per unit of risk. Stampede Drilling is currently generating about -0.01 per unit of volatility. If you would invest  31.00  in Stampede Drilling on September 3, 2024 and sell it today you would lose (12.00) from holding Stampede Drilling or give up 38.71% of portfolio value over 90 days.

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

Talon Metals Corp  vs.  Stampede Drilling

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Talon Metals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Stampede Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Talon Metals and Stampede Drilling

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

The idea behind Talon Metals Corp and Stampede Drilling 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.