Correlation Between Richmond Minerals and Pacific Bay

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

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

Diversification Opportunities for Richmond Minerals and Pacific Bay

0.07

Correlation Coefficient

Richmond Minerals  Pacific Bay

Significant diversification

The 3 months correlation between Richmond and Pacific is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Richmond Minerals and Pacific Bay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Bay Minerals and Richmond Minerals 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 Richmond Minerals are associated (or correlated) with Pacific Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Bay Minerals has no effect on the direction of Richmond Minerals i.e., Richmond Minerals and Pacific Bay go up and down completely randomly.

Pair Corralation between Richmond Minerals and Pacific Bay

Assuming the 90 days horizon Richmond Minerals is expected to generate 1.34 times more return on investment than Pacific Bay. However, Richmond Minerals is 1.34 times more volatile than Pacific Bay Minerals. It trades about 0.12 of its potential returns per unit of risk. Pacific Bay Minerals is currently generating about 0.12 per unit of risk. If you would invest  2.00  in Richmond Minerals on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Richmond Minerals or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Richmond Minerals  vs.  Pacific Bay Minerals

Richmond Minerals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Richmond Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pacific Bay Minerals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Bay Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacific Bay showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richmond Minerals and Pacific Bay

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

The idea behind Richmond Minerals and Pacific Bay 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.