Correlation Between Timberline Resources and Rackla Metals

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

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

Diversification Opportunities for Timberline Resources and Rackla Metals

-0.7

Correlation Coefficient

Timberline Resources  Rackla Metals

Excellent diversification

The 3 months correlation between Timberline and Rackla is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Timberline Resources and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals 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 Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of Timberline Resources i.e., Timberline Resources and Rackla Metals go up and down completely randomly.

Pair Corralation between Timberline Resources and Rackla Metals

If you would invest  2.10  in Rackla Metals on September 3, 2024 and sell it today you would earn a total of  4.90  from holding Rackla Metals or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Timberline Resources  vs.  Rackla Metals

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.

Rackla Metals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rackla Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Rackla Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timberline Resources and Rackla Metals

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

The idea behind Timberline Resources and Rackla Metals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.