Correlation Between Vulcan Energy and Rocky Mountain

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

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

Diversification Opportunities for Vulcan Energy and Rocky Mountain

-0.43

Correlation Coefficient

Vulcan Energy  Rocky Mountain

Very good diversification

The 3 months correlation between Vulcan and Rocky is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Energy Resources and Rocky Mountain High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain High and Vulcan Energy 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 Vulcan Energy Resources are associated (or correlated) with Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain High has no effect on the direction of Vulcan Energy i.e., Vulcan Energy and Rocky Mountain go up and down completely randomly.

Pair Corralation between Vulcan Energy and Rocky Mountain

Assuming the 90 days horizon Vulcan Energy Resources is expected to under-perform the Rocky Mountain. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vulcan Energy Resources is 5.24 times less risky than Rocky Mountain. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Rocky Mountain High is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.62  in Rocky Mountain High on September 26, 2024 and sell it today you would earn a total of  0.08  from holding Rocky Mountain High or generate 12.9% return on investment over 90 days.

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

Vulcan Energy Resources  vs.  Rocky Mountain High

Vulcan Energy Resources

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Vulcan Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Rocky Mountain High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Rocky Mountain sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Energy and Rocky Mountain

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

The idea behind Vulcan Energy Resources and Rocky Mountain High 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.