Correlation Between Searchlight Resources and Durango Resources

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

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

Diversification Opportunities for Searchlight Resources and Durango Resources

0.32

Correlation Coefficient

Searchlight Resources  Durango Resources

Weak diversification

The 3 months correlation between Searchlight and Durango is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Searchlight Resources and Durango Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durango Resources and Searchlight Resources 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 Searchlight Resources are associated (or correlated) with Durango Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durango Resources has no effect on the direction of Searchlight Resources i.e., Searchlight Resources and Durango Resources go up and down completely randomly.

Pair Corralation between Searchlight Resources and Durango Resources

Assuming the 90 days horizon Searchlight Resources is expected to under-perform the Durango Resources. In addition to that, Searchlight Resources is 1.25 times more volatile than Durango Resources. It trades about -0.01 of its total potential returns per unit of risk. Durango Resources is currently generating about 0.03 per unit of volatility. If you would invest  1.94  in Durango Resources on September 5, 2024 and sell it today you would lose (0.47) from holding Durango Resources or give up 24.23% of portfolio value over 90 days.

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

Searchlight Resources  vs.  Durango Resources

Searchlight Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Searchlight Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Searchlight Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Durango Resources

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Searchlight Resources and Durango Resources

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

The idea behind Searchlight Resources and Durango 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.