Correlation Between Pardee Resources and Beaver Coal

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

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

Diversification Opportunities for Pardee Resources and Beaver Coal

0.64

Correlation Coefficient

Pardee Resources  Beaver Coal

Poor diversification

The 3 months correlation between Pardee and Beaver is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pardee Resources Co and Beaver Coal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beaver Coal and Pardee Resources 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 Pardee Resources Co are associated (or correlated) with Beaver Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beaver Coal has no effect on the direction of Pardee Resources i.e., Pardee Resources and Beaver Coal go up and down completely randomly.

Pair Corralation between Pardee Resources and Beaver Coal

Given the investment horizon of 90 days Pardee Resources is expected to generate 1.5 times less return on investment than Beaver Coal. But when comparing it to its historical volatility, Pardee Resources Co is 1.69 times less risky than Beaver Coal. It trades about 0.08 of its potential returns per unit of risk. Beaver Coal Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  242,841  in Beaver Coal Co on September 12, 2024 and sell it today you would earn a total of  92,159  from holding Beaver Coal Co or generate 37.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.14%
Values	Daily Returns

Pardee Resources Co  vs.  Beaver Coal Co

Pardee Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pardee Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beaver Coal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beaver Coal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Beaver Coal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pardee Resources and Beaver Coal

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

The idea behind Pardee Resources Co and Beaver Coal Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.