Correlation Between Talga and Sienna Resources

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

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

Diversification Opportunities for Talga and Sienna Resources

-0.46

Correlation Coefficient

Talga  Sienna Resources

Very good diversification

The 3 months correlation between Talga and Sienna is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Talga Group and Sienna Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Resources and Talga 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 Talga Group are associated (or correlated) with Sienna Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Resources has no effect on the direction of Talga i.e., Talga and Sienna Resources go up and down completely randomly.

Pair Corralation between Talga and Sienna Resources

Assuming the 90 days horizon Talga Group is expected to generate 1.16 times more return on investment than Sienna Resources. However, Talga is 1.16 times more volatile than Sienna Resources. It trades about 0.06 of its potential returns per unit of risk. Sienna Resources is currently generating about -0.02 per unit of risk. If you would invest  26.00  in Talga Group on September 14, 2024 and sell it today you would earn a total of  2.00  from holding Talga Group or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Talga Group  vs.  Sienna Resources

Talga Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Talga and Sienna Resources

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

The idea behind Talga Group and Sienna 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.