Correlation Between Max Resource and Scottie Resources

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

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

Diversification Opportunities for Max Resource and Scottie Resources

0.46

Correlation Coefficient

Max Resource  Scottie Resources

Very weak diversification

The 3 months correlation between Max and Scottie is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Max Resource Corp and Scottie Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottie Resources Corp and Max Resource 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 Max Resource Corp are associated (or correlated) with Scottie Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottie Resources Corp has no effect on the direction of Max Resource i.e., Max Resource and Scottie Resources go up and down completely randomly.

Pair Corralation between Max Resource and Scottie Resources

Assuming the 90 days horizon Max Resource Corp is expected to under-perform the Scottie Resources. In addition to that, Max Resource is 1.58 times more volatile than Scottie Resources Corp. It trades about -0.01 of its total potential returns per unit of risk. Scottie Resources Corp is currently generating about 0.0 per unit of volatility. If you would invest  14.00  in Scottie Resources Corp on September 1, 2024 and sell it today you would lose (2.00) from holding Scottie Resources Corp or give up 14.29% of portfolio value over 90 days.

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

Max Resource Corp  vs.  Scottie Resources Corp

Max Resource Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Resource Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Max Resource is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Scottie Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scottie Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Scottie Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Max Resource and Scottie Resources

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

The idea behind Max Resource Corp and Scottie Resources Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.