Correlation Between Red Moon and Sassy Resources

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

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

Diversification Opportunities for Red Moon and Sassy Resources

0.22

Correlation Coefficient

Red Moon  Sassy Resources

Modest diversification

The 3 months correlation between Red and Sassy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Red Moon Resources and Sassy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sassy Resources and Red Moon 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 Moon Resources are associated (or correlated) with Sassy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sassy Resources has no effect on the direction of Red Moon i.e., Red Moon and Sassy Resources go up and down completely randomly.

Pair Corralation between Red Moon and Sassy Resources

Assuming the 90 days horizon Red Moon is expected to generate 228.88 times less return on investment than Sassy Resources. But when comparing it to its historical volatility, Red Moon Resources is 9.53 times less risky than Sassy Resources. It trades about 0.0 of its potential returns per unit of risk. Sassy Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Sassy Resources on September 5, 2024 and sell it today you would lose (10.50) from holding Sassy Resources or give up 65.62% of portfolio value over 90 days.

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

Red Moon Resources  vs.  Sassy Resources

Red Moon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Moon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sassy Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sassy Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sassy Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Moon and Sassy Resources

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

The idea behind Red Moon Resources and Sassy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.