Correlation Between Aston Minerals and Red Moon

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

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

Diversification Opportunities for Aston Minerals and Red Moon

-0.3

Correlation Coefficient

Aston Minerals  Red Moon

Very good diversification

The 3 months correlation between Aston and Red is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aston Minerals and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources and Aston Minerals 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 Aston Minerals are associated (or correlated) with Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Aston Minerals i.e., Aston Minerals and Red Moon go up and down completely randomly.

Pair Corralation between Aston Minerals and Red Moon

Assuming the 90 days horizon Aston Minerals is expected to generate 5.69 times more return on investment than Red Moon. However, Aston Minerals is 5.69 times more volatile than Red Moon Resources. It trades about 0.09 of its potential returns per unit of risk. Red Moon Resources is currently generating about -0.06 per unit of risk. If you would invest  0.50  in Aston Minerals on September 12, 2024 and sell it today you would earn a total of  0.25  from holding Aston Minerals or generate 50.0% return on investment over 90 days.

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

Aston Minerals  vs.  Red Moon Resources

Aston Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aston Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aston Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Red Moon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Moon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aston Minerals and Red Moon

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

The idea behind Aston Minerals and Red Moon 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.