Correlation Between Ceylon Graphite and Hudson Resources

Can any of the company-specific risk be diversified away by investing in both Ceylon Graphite and Hudson Resources 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 Ceylon Graphite and Hudson Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ceylon Graphite and Hudson Resources

-0.34

Correlation Coefficient

Ceylon Graphite  Hudson Resources

Very good diversification

The 3 months correlation between Ceylon and Hudson is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ceylon Graphite Corp and Hudson Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Resources and Ceylon Graphite 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 Ceylon Graphite Corp are associated (or correlated) with Hudson Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Resources has no effect on the direction of Ceylon Graphite i.e., Ceylon Graphite and Hudson Resources go up and down completely randomly.

Pair Corralation between Ceylon Graphite and Hudson Resources

Assuming the 90 days horizon Ceylon Graphite Corp is expected to under-perform the Hudson Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ceylon Graphite Corp is 3.34 times less risky than Hudson Resources. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Hudson Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Hudson Resources on September 14, 2024 and sell it today you would earn a total of  0.38  from holding Hudson Resources or generate 38.0% return on investment over 90 days.

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

Ceylon Graphite Corp  vs.  Hudson Resources

Ceylon Graphite Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ceylon Graphite Corp 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 basic 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.

Hudson Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Hudson Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ceylon Graphite and Hudson Resources

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

The idea behind Ceylon Graphite Corp and Hudson 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.