Correlation Between Pure Energy and Palamina Corp

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

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

Diversification Opportunities for Pure Energy and Palamina Corp

0.02

Correlation Coefficient

Pure Energy  Palamina Corp

Significant diversification

The 3 months correlation between Pure and Palamina is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pure Energy Minerals and Palamina Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palamina Corp and Pure Energy 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 Pure Energy Minerals are associated (or correlated) with Palamina Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palamina Corp has no effect on the direction of Pure Energy i.e., Pure Energy and Palamina Corp go up and down completely randomly.

Pair Corralation between Pure Energy and Palamina Corp

Given the investment horizon of 90 days Pure Energy is expected to generate 1.19 times less return on investment than Palamina Corp. In addition to that, Pure Energy is 1.12 times more volatile than Palamina Corp. It trades about 0.03 of its total potential returns per unit of risk. Palamina Corp is currently generating about 0.05 per unit of volatility. If you would invest  8.00  in Palamina Corp on September 21, 2024 and sell it today you would earn a total of  3.00  from holding Palamina Corp or generate 37.5% return on investment over 90 days.

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

Pure Energy Minerals  vs.  Palamina Corp

Pure Energy Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Energy Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pure Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Palamina Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palamina Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Pure Energy and Palamina Corp

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

The idea behind Pure Energy Minerals and Palamina 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.