Correlation Between North Peak and Rackla Metals

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

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

Diversification Opportunities for North Peak and Rackla Metals

-0.4

Correlation Coefficient

North Peak  Rackla Metals

Very good diversification

The 3 months correlation between North and Rackla is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding North Peak Resources and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals and North Peak 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 North Peak Resources are associated (or correlated) with Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of North Peak i.e., North Peak and Rackla Metals go up and down completely randomly.

Pair Corralation between North Peak and Rackla Metals

Assuming the 90 days horizon North Peak Resources is expected to generate 0.56 times more return on investment than Rackla Metals. However, North Peak Resources is 1.78 times less risky than Rackla Metals. It trades about 0.0 of its potential returns per unit of risk. Rackla Metals is currently generating about -0.2 per unit of risk. If you would invest  46.00  in North Peak Resources on September 13, 2024 and sell it today you would lose (1.00) from holding North Peak Resources or give up 2.17% of portfolio value over 90 days.

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

North Peak Resources  vs.  Rackla Metals

North Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rackla Metals

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with North Peak and Rackla Metals

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

The idea behind North Peak Resources and Rackla Metals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.