Correlation Between Grande Portage and Vulcan Minerals

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

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

Diversification Opportunities for Grande Portage and Vulcan Minerals

0.75

Correlation Coefficient

Grande Portage  Vulcan Minerals

Poor diversification

The 3 months correlation between Grande and Vulcan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Grande Portage Resources and Vulcan Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Minerals and Grande Portage 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 Grande Portage Resources are associated (or correlated) with Vulcan Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Minerals has no effect on the direction of Grande Portage i.e., Grande Portage and Vulcan Minerals go up and down completely randomly.

Pair Corralation between Grande Portage and Vulcan Minerals

Assuming the 90 days horizon Grande Portage Resources is expected to generate 1.24 times more return on investment than Vulcan Minerals. However, Grande Portage is 1.24 times more volatile than Vulcan Minerals. It trades about 0.02 of its potential returns per unit of risk. Vulcan Minerals is currently generating about 0.01 per unit of risk. If you would invest  24.00  in Grande Portage Resources on September 25, 2024 and sell it today you would lose (5.00) from holding Grande Portage Resources or give up 20.83% of portfolio value over 90 days.

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

Grande Portage Resources  vs.  Vulcan Minerals

Grande Portage Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grande Portage Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Vulcan Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vulcan Minerals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Grande Portage and Vulcan Minerals

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

The idea behind Grande Portage Resources and Vulcan Minerals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.