Correlation Between Mineral Res and BCM Resources

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

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

Diversification Opportunities for Mineral Res and BCM Resources

-0.12

Correlation Coefficient

Mineral Res  BCM Resources

Good diversification

The 3 months correlation between Mineral and BCM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Res and BCM Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCM Resources and Mineral Res 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 Mineral Res are associated (or correlated) with BCM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCM Resources has no effect on the direction of Mineral Res i.e., Mineral Res and BCM Resources go up and down completely randomly.

Pair Corralation between Mineral Res and BCM Resources

Assuming the 90 days horizon Mineral Res is expected to generate 0.41 times more return on investment than BCM Resources. However, Mineral Res is 2.43 times less risky than BCM Resources. It trades about -0.01 of its potential returns per unit of risk. BCM Resources is currently generating about -0.02 per unit of risk. If you would invest  2,588  in Mineral Res on September 13, 2024 and sell it today you would lose (260.00) from holding Mineral Res or give up 10.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Mineral Res  vs.  BCM Resources

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mineral Res is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BCM Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCM Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mineral Res and BCM Resources

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

The idea behind Mineral Res and BCM 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.