Correlation Between African Rainbow and Snow Lake

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

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

Diversification Opportunities for African Rainbow and Snow Lake

-0.24

Correlation Coefficient

African Rainbow  Snow Lake

Very good diversification

The 3 months correlation between African and Snow is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals and Snow Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Lake Resources and African Rainbow 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 African Rainbow Minerals are associated (or correlated) with Snow Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Lake Resources has no effect on the direction of African Rainbow i.e., African Rainbow and Snow Lake go up and down completely randomly.

Pair Corralation between African Rainbow and Snow Lake

If you would invest  1,220  in African Rainbow Minerals on September 15, 2024 and sell it today you would earn a total of  0.00  from holding African Rainbow Minerals or generate 0.0% return on investment over 90 days.

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

African Rainbow Minerals  vs.  Snow Lake Resources

African Rainbow Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Snow Lake Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snow Lake Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with African Rainbow and Snow Lake

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

The idea behind African Rainbow Minerals and Snow Lake 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.