Correlation Between Happy Creek and Galore Resources

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

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

Diversification Opportunities for Happy Creek and Galore Resources

0.22

Correlation Coefficient

Happy Creek  Galore Resources

Modest diversification

The 3 months correlation between Happy and Galore is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Happy Creek Minerals and Galore Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galore Resources and Happy Creek 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 Happy Creek Minerals are associated (or correlated) with Galore Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galore Resources has no effect on the direction of Happy Creek i.e., Happy Creek and Galore Resources go up and down completely randomly.

Pair Corralation between Happy Creek and Galore Resources

Assuming the 90 days horizon Happy Creek is expected to generate 3.23 times less return on investment than Galore Resources. But when comparing it to its historical volatility, Happy Creek Minerals is 2.87 times less risky than Galore Resources. It trades about 0.07 of its potential returns per unit of risk. Galore Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Galore Resources on September 26, 2024 and sell it today you would lose (1.00) from holding Galore Resources or give up 50.0% of portfolio value over 90 days.

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

Happy Creek Minerals  vs.  Galore Resources

Happy Creek Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Happy Creek Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Happy Creek showed solid returns over the last few months and may actually be approaching a breakup point.

Galore Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Galore Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Galore Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Happy Creek and Galore Resources

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

The idea behind Happy Creek Minerals and Galore 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 Transaction History module to view history of all your transactions and understand their impact on performance.