Correlation Between Ritchie Bros and Talon Metals

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

By analyzing existing cross correlation between Ritchie Bros Auctioneers and Talon Metals Corp, you can compare the effects of market volatilities on Ritchie Bros and Talon Metals 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 Ritchie Bros with a short position of Talon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ritchie Bros and Talon Metals.

Diversification Opportunities for Ritchie Bros and Talon Metals

-0.52

Correlation Coefficient

Ritchie Bros  Talon Metals

Excellent diversification

The 3 months correlation between Ritchie and Talon is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals Corp and Ritchie Bros 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 Ritchie Bros Auctioneers are associated (or correlated) with Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and Talon Metals go up and down completely randomly.

Pair Corralation between Ritchie Bros and Talon Metals

Assuming the 90 days trading horizon Ritchie Bros Auctioneers is expected to generate 0.3 times more return on investment than Talon Metals. However, Ritchie Bros Auctioneers is 3.32 times less risky than Talon Metals. It trades about 0.18 of its potential returns per unit of risk. Talon Metals Corp is currently generating about -0.03 per unit of risk. If you would invest  11,586  in Ritchie Bros Auctioneers on August 30, 2024 and sell it today you would earn a total of  2,099  from holding Ritchie Bros Auctioneers or generate 18.12% return on investment over 90 days.

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

Ritchie Bros Auctioneers  vs.  Talon Metals Corp

Ritchie Bros Auctioneers

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros displayed solid returns over the last few months and may actually be approaching a breakup point.

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Ritchie Bros and Talon Metals

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

The idea behind Ritchie Bros Auctioneers and Talon Metals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .