Correlation Between Timberline Resources and Bonterra Resources

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

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

Diversification Opportunities for Timberline Resources and Bonterra Resources

0.56

Correlation Coefficient

Timberline Resources  Bonterra Resources

Very weak diversification

The 3 months correlation between Timberline and Bonterra is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Timberline Resources and Bonterra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonterra Resources and Timberline 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 Timberline Resources are associated (or correlated) with Bonterra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonterra Resources has no effect on the direction of Timberline Resources i.e., Timberline Resources and Bonterra Resources go up and down completely randomly.

Pair Corralation between Timberline Resources and Bonterra Resources

If you would invest  6.00  in Timberline Resources on August 31, 2024 and sell it today you would earn a total of  0.00  from holding Timberline Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Timberline Resources  vs.  Bonterra Resources

Timberline Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timberline Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Timberline Resources is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Bonterra Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonterra Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bonterra Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Timberline Resources and Bonterra Resources

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

The idea behind Timberline Resources and Bonterra 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.