Correlation Between Truscott Mining and Red Hill

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

By analyzing existing cross correlation between Truscott Mining Corp and Red Hill Iron, you can compare the effects of market volatilities on Truscott Mining and Red Hill 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 Truscott Mining with a short position of Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truscott Mining and Red Hill.

Diversification Opportunities for Truscott Mining and Red Hill

0.35

Correlation Coefficient

Truscott Mining  Red Hill

Weak diversification

The 3 months correlation between Truscott and Red is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Truscott Mining Corp and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron and Truscott Mining 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 Truscott Mining Corp are associated (or correlated) with Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Truscott Mining i.e., Truscott Mining and Red Hill go up and down completely randomly.

Pair Corralation between Truscott Mining and Red Hill

Assuming the 90 days trading horizon Truscott Mining is expected to generate 1.87 times less return on investment than Red Hill. In addition to that, Truscott Mining is 1.61 times more volatile than Red Hill Iron. It trades about 0.06 of its total potential returns per unit of risk. Red Hill Iron is currently generating about 0.19 per unit of volatility. If you would invest  310.00  in Red Hill Iron on September 22, 2024 and sell it today you would earn a total of  102.00  from holding Red Hill Iron or generate 32.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Truscott Mining Corp  vs.  Red Hill Iron

Truscott Mining Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Truscott Mining Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Truscott Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Red Hill Iron

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Truscott Mining and Red Hill

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

The idea behind Truscott Mining Corp and Red Hill Iron 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.