Correlation Between Solitario Exploration and Compass Minerals

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

By analyzing existing cross correlation between Solitario Exploration Royalty and Compass Minerals International, you can compare the effects of market volatilities on Solitario Exploration and Compass Minerals 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 Solitario Exploration with a short position of Compass Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solitario Exploration and Compass Minerals.

Diversification Opportunities for Solitario Exploration and Compass Minerals

-0.49

Correlation Coefficient

Solitario Exploration  Compass Minerals

Very good diversification

The 3 months correlation between Solitario and Compass is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Solitario Exploration Royalty and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int and Solitario Exploration 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 Solitario Exploration Royalty are associated (or correlated) with Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Solitario Exploration i.e., Solitario Exploration and Compass Minerals go up and down completely randomly.

Pair Corralation between Solitario Exploration and Compass Minerals

Considering the 90-day investment horizon Solitario Exploration Royalty is expected to generate 1.36 times more return on investment than Compass Minerals. However, Solitario Exploration is 1.36 times more volatile than Compass Minerals International. It trades about 0.06 of its potential returns per unit of risk. Compass Minerals International is currently generating about -0.47 per unit of risk. If you would invest  59.00  in Solitario Exploration Royalty on September 22, 2024 and sell it today you would earn a total of  2.00  from holding Solitario Exploration Royalty or generate 3.39% return on investment over 90 days.

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

Solitario Exploration Royalty  vs.  Compass Minerals International

Solitario Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitario Exploration Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Compass Minerals Int

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Minerals International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Compass Minerals is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Solitario Exploration and Compass Minerals

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

The idea behind Solitario Exploration Royalty and Compass Minerals International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.