Correlation Between St James and Red Pine

Can any of the company-specific risk be diversified away by investing in both St James and Red Pine 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 St James and Red Pine into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for St James and Red Pine

0.53

Correlation Coefficient

St James  Red Pine

Very weak diversification

The 3 months correlation between LRDJF and Red is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding St James Gold and Red Pine Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Pine Exploration and St James 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 St James Gold are associated (or correlated) with Red Pine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Pine Exploration has no effect on the direction of St James i.e., St James and Red Pine go up and down completely randomly.

Pair Corralation between St James and Red Pine

Assuming the 90 days horizon St James Gold is expected to generate 1.81 times more return on investment than Red Pine. However, St James is 1.81 times more volatile than Red Pine Exploration. It trades about 0.04 of its potential returns per unit of risk. Red Pine Exploration is currently generating about 0.04 per unit of risk. If you would invest  7.50  in St James Gold on September 3, 2024 and sell it today you would earn a total of  0.00  from holding St James Gold or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

St James Gold  vs.  Red Pine Exploration

St James Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in St James Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, St James reported solid returns over the last few months and may actually be approaching a breakup point.

Red Pine Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Pine Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Red Pine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St James and Red Pine

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

The idea behind St James Gold and Red Pine 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.