Correlation Between Richmond Minerals and Stellar AfricaGold

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

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

Diversification Opportunities for Richmond Minerals and Stellar AfricaGold

-0.06

Correlation Coefficient

Richmond Minerals  Stellar AfricaGold

Good diversification

The 3 months correlation between Richmond and Stellar is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Richmond Minerals and Stellar AfricaGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellar AfricaGold 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 Stellar AfricaGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellar AfricaGold has no effect on the direction of Richmond Minerals i.e., Richmond Minerals and Stellar AfricaGold go up and down completely randomly.

Pair Corralation between Richmond Minerals and Stellar AfricaGold

Assuming the 90 days horizon Richmond Minerals is expected to generate 1.41 times more return on investment than Stellar AfricaGold. However, Richmond Minerals is 1.41 times more volatile than Stellar AfricaGold. It trades about 0.06 of its potential returns per unit of risk. Stellar AfricaGold is currently generating about 0.02 per unit of risk. If you would invest  3.00  in Richmond Minerals on September 30, 2024 and sell it today you would lose (0.50) from holding Richmond Minerals or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Richmond Minerals  vs.  Stellar AfricaGold

Richmond Minerals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Minerals are ranked lower than 4 (%) 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.

Stellar AfricaGold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar AfricaGold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Stellar AfricaGold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richmond Minerals and Stellar AfricaGold

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

The idea behind Richmond Minerals and Stellar AfricaGold 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 Stocks Directory module to find actively traded stocks across global markets.