Correlation Between Transition Metals and Hudson Resources

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

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

Diversification Opportunities for Transition Metals and Hudson Resources

-0.08

Correlation Coefficient

Transition Metals  Hudson Resources

Good diversification

The 3 months correlation between Transition and Hudson is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Transition Metals Corp and Hudson Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Resources and Transition 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 Transition Metals Corp are associated (or correlated) with Hudson Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Resources has no effect on the direction of Transition Metals i.e., Transition Metals and Hudson Resources go up and down completely randomly.

Pair Corralation between Transition Metals and Hudson Resources

Assuming the 90 days horizon Transition Metals Corp is expected to generate 3.44 times more return on investment than Hudson Resources. However, Transition Metals is 3.44 times more volatile than Hudson Resources. It trades about 0.1 of its potential returns per unit of risk. Hudson Resources is currently generating about 0.13 per unit of risk. If you would invest  3.45  in Transition Metals Corp on December 30, 2024 and sell it today you would earn a total of  0.05  from holding Transition Metals Corp or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.25%
Values	Daily Returns

Transition Metals Corp  vs.  Hudson Resources

Transition Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transition Metals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Transition Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Hudson Resources

Risk-Adjusted Performance

OK

Over the last 90 days Hudson Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Hudson Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transition Metals and Hudson Resources

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

The idea behind Transition Metals Corp and Hudson 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.