Correlation Between Big Ridge and Astra Exploration

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

By analyzing existing cross correlation between Big Ridge Gold and Astra Exploration, you can compare the effects of market volatilities on Big Ridge and Astra Exploration 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 Big Ridge with a short position of Astra Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Ridge and Astra Exploration.

Diversification Opportunities for Big Ridge and Astra Exploration

0.35

Correlation Coefficient

Big Ridge  Astra Exploration

Weak diversification

The 3 months correlation between Big and Astra is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold and Astra Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Exploration and Big Ridge 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 Big Ridge Gold are associated (or correlated) with Astra Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Exploration has no effect on the direction of Big Ridge i.e., Big Ridge and Astra Exploration go up and down completely randomly.

Pair Corralation between Big Ridge and Astra Exploration

Assuming the 90 days trading horizon Big Ridge Gold is expected to generate 1.31 times more return on investment than Astra Exploration. However, Big Ridge is 1.31 times more volatile than Astra Exploration. It trades about 0.04 of its potential returns per unit of risk. Astra Exploration is currently generating about 0.04 per unit of risk. If you would invest  8.00  in Big Ridge Gold on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Big Ridge Gold or generate 25.0% return on investment over 90 days.

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

Big Ridge Gold  vs.  Astra Exploration

Big Ridge Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Big Ridge showed solid returns over the last few months and may actually be approaching a breakup point.

Astra Exploration

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Exploration are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Astra Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Ridge and Astra Exploration

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

The idea behind Big Ridge Gold and Astra Exploration 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.