Correlation Between Red Pine and Wolfden Resources

Can any of the company-specific risk be diversified away by investing in both Red Pine and Wolfden Resources 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 Wolfden Resources 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 Wolfden Resources, you can compare the effects of market volatilities on Red Pine and Wolfden Resources 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 Wolfden Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Pine and Wolfden Resources.

Diversification Opportunities for Red Pine and Wolfden Resources

0.05

Correlation Coefficient

Red Pine  Wolfden Resources

Significant diversification

The 3 months correlation between Red and Wolfden is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and Wolfden Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfden 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 Wolfden Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfden Resources has no effect on the direction of Red Pine i.e., Red Pine and Wolfden Resources go up and down completely randomly.

Pair Corralation between Red Pine and Wolfden Resources

Assuming the 90 days horizon Red Pine Exploration is expected to under-perform the Wolfden Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, Red Pine Exploration is 31.95 times less risky than Wolfden Resources. The otc stock trades about -0.05 of its potential returns per unit of risk. The Wolfden Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.07  in Wolfden Resources on September 22, 2024 and sell it today you would earn a total of  1.93  from holding Wolfden Resources or generate 93.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Red Pine Exploration  vs.  Wolfden 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.

Wolfden Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfden Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Wolfden Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Pine and Wolfden Resources

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

The idea behind Red Pine Exploration and Wolfden 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.