Correlation Between Red Pine and New Destiny

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

Diversification Opportunities for Red Pine and New Destiny

0.16

Correlation Coefficient

Red Pine  New Destiny

Average diversification

The 3 months correlation between Red and New is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration and New Destiny Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Destiny Mining 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 New Destiny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Destiny Mining has no effect on the direction of Red Pine i.e., Red Pine and New Destiny go up and down completely randomly.

Pair Corralation between Red Pine and New Destiny

Assuming the 90 days horizon Red Pine is expected to generate 6.41 times less return on investment than New Destiny. But when comparing it to its historical volatility, Red Pine Exploration is 1.76 times less risky than New Destiny. It trades about 0.02 of its potential returns per unit of risk. New Destiny Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.00  in New Destiny Mining on September 12, 2024 and sell it today you would earn a total of  1.00  from holding New Destiny Mining or generate 50.0% return on investment over 90 days.

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

Red Pine Exploration  vs.  New Destiny Mining

Red Pine Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Pine Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Red Pine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

New Destiny Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Destiny Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Red Pine and New Destiny

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

The idea behind Red Pine Exploration and New Destiny Mining 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.