Correlation Between Mazda and ALX Resources

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

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

Diversification Opportunities for Mazda and ALX Resources

-0.45

Correlation Coefficient

Mazda  ALX Resources

Very good diversification

The 3 months correlation between Mazda and ALX is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor and ALX Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Resources Corp and Mazda 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 Mazda Motor are associated (or correlated) with ALX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Resources Corp has no effect on the direction of Mazda i.e., Mazda and ALX Resources go up and down completely randomly.

Pair Corralation between Mazda and ALX Resources

Assuming the 90 days horizon Mazda is expected to generate 10.1 times less return on investment than ALX Resources. But when comparing it to its historical volatility, Mazda Motor is 3.12 times less risky than ALX Resources. It trades about 0.02 of its potential returns per unit of risk. ALX Resources Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.09  in ALX Resources Corp on September 14, 2024 and sell it today you would lose (1.02) from holding ALX Resources Corp or give up 33.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.66%
Values	Daily Returns

Mazda Motor  vs.  ALX Resources Corp

Mazda Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mazda Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ALX Resources Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALX Resources Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, ALX Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mazda and ALX Resources

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

The idea behind Mazda Motor and ALX 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.