Correlation Between Rock Tech and Monarca Minerals

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

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

Diversification Opportunities for Rock Tech and Monarca Minerals

0.1

Correlation Coefficient

Rock Tech  Monarca Minerals

Average diversification

The 3 months correlation between Rock and Monarca is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium and Monarca Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarca Minerals and Rock Tech 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 Rock Tech Lithium are associated (or correlated) with Monarca Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarca Minerals has no effect on the direction of Rock Tech i.e., Rock Tech and Monarca Minerals go up and down completely randomly.

Pair Corralation between Rock Tech and Monarca Minerals

Assuming the 90 days horizon Rock Tech Lithium is expected to under-perform the Monarca Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Rock Tech Lithium is 5.4 times less risky than Monarca Minerals. The stock trades about -0.02 of its potential returns per unit of risk. The Monarca Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Monarca Minerals on September 25, 2024 and sell it today you would lose (1.50) from holding Monarca Minerals or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Rock Tech Lithium  vs.  Monarca Minerals

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium 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 stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Monarca Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monarca Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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 Rock Tech and Monarca Minerals

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

The idea behind Rock Tech Lithium and Monarca Minerals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.