Correlation Between Noranda Aluminum and Ramaco Resources

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

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

Diversification Opportunities for Noranda Aluminum and Ramaco Resources

-0.41

Correlation Coefficient

Noranda Aluminum  Ramaco Resources

Very good diversification

The 3 months correlation between Noranda and Ramaco is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Noranda Aluminum Holding and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources and Noranda Aluminum 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 Noranda Aluminum Holding are associated (or correlated) with Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Noranda Aluminum i.e., Noranda Aluminum and Ramaco Resources go up and down completely randomly.

Pair Corralation between Noranda Aluminum and Ramaco Resources

If you would invest  1,007  in Ramaco Resources on September 12, 2024 and sell it today you would earn a total of  268.00  from holding Ramaco Resources or generate 26.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Noranda Aluminum Holding  vs.  Ramaco Resources

Noranda Aluminum Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noranda Aluminum Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Noranda Aluminum is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Ramaco Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ramaco Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ramaco Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Noranda Aluminum and Ramaco Resources

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

The idea behind Noranda Aluminum Holding and Ramaco 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.