Correlation Between Stellar AfricaGold and Richmond Minerals

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

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

Diversification Opportunities for Stellar AfricaGold and Richmond Minerals

-0.06

Correlation Coefficient

Stellar AfricaGold  Richmond Minerals

Good diversification

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

Pair Corralation between Stellar AfricaGold and Richmond Minerals

Assuming the 90 days horizon Stellar AfricaGold is expected to generate 4.17 times less return on investment than Richmond Minerals. But when comparing it to its historical volatility, Stellar AfricaGold is 1.41 times less risky than Richmond Minerals. It trades about 0.02 of its potential returns per unit of risk. Richmond Minerals is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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

Stellar AfricaGold  vs.  Richmond Minerals

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.

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.

Pair Trading with Stellar AfricaGold and Richmond Minerals

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

The idea behind Stellar AfricaGold and Richmond Minerals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.