Correlation Between Talon Metals and Laurentian Bank

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

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

Diversification Opportunities for Talon Metals and Laurentian Bank

-0.1

Correlation Coefficient

Talon Metals  Laurentian Bank

Good diversification

The 3 months correlation between Talon and Laurentian is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and Talon Metals 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 Talon Metals Corp are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Talon Metals i.e., Talon Metals and Laurentian Bank go up and down completely randomly.

Pair Corralation between Talon Metals and Laurentian Bank

Assuming the 90 days trading horizon Talon Metals is expected to generate 1.25 times less return on investment than Laurentian Bank. In addition to that, Talon Metals is 3.74 times more volatile than Laurentian Bank. It trades about 0.02 of its total potential returns per unit of risk. Laurentian Bank is currently generating about 0.11 per unit of volatility. If you would invest  2,662  in Laurentian Bank on September 23, 2024 and sell it today you would earn a total of  221.00  from holding Laurentian Bank or generate 8.3% return on investment over 90 days.

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

Talon Metals Corp  vs.  Laurentian Bank

Talon Metals Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talon Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Talon Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Laurentian Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laurentian Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Talon Metals and Laurentian Bank

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

The idea behind Talon Metals Corp and Laurentian Bank 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.