Correlation Between Signature Resources and Rathdowney Resources

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

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

Diversification Opportunities for Signature Resources and Rathdowney Resources

-0.01

Correlation Coefficient

Signature Resources  Rathdowney Resources

Good diversification

The 3 months correlation between Signature and Rathdowney is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Signature Resources and Rathdowney Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rathdowney Resources and Signature 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 Signature Resources are associated (or correlated) with Rathdowney Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rathdowney Resources has no effect on the direction of Signature Resources i.e., Signature Resources and Rathdowney Resources go up and down completely randomly.

Pair Corralation between Signature Resources and Rathdowney Resources

Assuming the 90 days horizon Signature Resources is expected to under-perform the Rathdowney Resources. But the stock apears to be less risky and, when comparing its historical volatility, Signature Resources is 2.27 times less risky than Rathdowney Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Rathdowney Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Rathdowney Resources on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Rathdowney Resources or generate 0.0% return on investment over 90 days.

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

Signature Resources  vs.  Rathdowney Resources

Signature Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Resources 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.

Rathdowney Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rathdowney Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rathdowney Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Signature Resources and Rathdowney Resources

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

The idea behind Signature Resources and Rathdowney 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.