Correlation Between Red Pine and Eagle Plains

Can any of the company-specific risk be diversified away by investing in both Red Pine and Eagle Plains 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 Red Pine and Eagle Plains into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Red Pine Exploration and Eagle Plains Resources, you can compare the effects of market volatilities on Red Pine and Eagle Plains 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 Red Pine with a short position of Eagle Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Pine and Eagle Plains.

Diversification Opportunities for Red Pine and Eagle Plains

0.49

Correlation Coefficient

Red Pine  Eagle Plains

Very weak diversification

The 3 months correlation between Red and Eagle is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Eagle Plains Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Plains Resources and Red Pine 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 Red Pine Exploration are associated (or correlated) with Eagle Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Plains Resources has no effect on the direction of Red Pine i.e., Red Pine and Eagle Plains go up and down completely randomly.

Pair Corralation between Red Pine and Eagle Plains

Assuming the 90 days horizon Red Pine Exploration is expected to under-perform the Eagle Plains. But the otc stock apears to be less risky and, when comparing its historical volatility, Red Pine Exploration is 5.35 times less risky than Eagle Plains. The otc stock trades about -0.15 of its potential returns per unit of risk. The Eagle Plains Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Eagle Plains Resources on September 23, 2024 and sell it today you would lose (1.00) from holding Eagle Plains Resources or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Red Pine Exploration  vs.  Eagle Plains Resources

Red Pine Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Pine Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Eagle Plains Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Plains Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Eagle Plains reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Pine and Eagle Plains

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

The idea behind Red Pine Exploration and Eagle Plains 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.