Correlation Between Sienna Resources and Critical Elements

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

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

Diversification Opportunities for Sienna Resources and Critical Elements

0.37

Correlation Coefficient

Sienna Resources  Critical Elements

Weak diversification

The 3 months correlation between Sienna and Critical is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Resources and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements and Sienna 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 Sienna Resources are associated (or correlated) with Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of Sienna Resources i.e., Sienna Resources and Critical Elements go up and down completely randomly.

Pair Corralation between Sienna Resources and Critical Elements

Assuming the 90 days horizon Sienna Resources is expected to under-perform the Critical Elements. In addition to that, Sienna Resources is 1.69 times more volatile than Critical Elements. It trades about -0.02 of its total potential returns per unit of risk. Critical Elements is currently generating about -0.01 per unit of volatility. If you would invest  29.00  in Critical Elements on September 15, 2024 and sell it today you would lose (3.00) from holding Critical Elements or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Sienna Resources  vs.  Critical Elements

Sienna Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Critical Elements

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sienna Resources and Critical Elements

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

The idea behind Sienna Resources and Critical Elements 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.