Correlation Between Aston Minerals and Thunderstruck Resources

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

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

Diversification Opportunities for Aston Minerals and Thunderstruck Resources

0.09

Correlation Coefficient

Aston Minerals  Thunderstruck Resources

Significant diversification

The 3 months correlation between Aston and Thunderstruck is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aston Minerals and Thunderstruck Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunderstruck Resources and Aston Minerals 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 Aston Minerals are associated (or correlated) with Thunderstruck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunderstruck Resources has no effect on the direction of Aston Minerals i.e., Aston Minerals and Thunderstruck Resources go up and down completely randomly.

Pair Corralation between Aston Minerals and Thunderstruck Resources

Assuming the 90 days horizon Aston Minerals is expected to generate 1.72 times less return on investment than Thunderstruck Resources. But when comparing it to its historical volatility, Aston Minerals is 2.0 times less risky than Thunderstruck Resources. It trades about 0.09 of its potential returns per unit of risk. Thunderstruck Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Thunderstruck Resources on September 13, 2024 and sell it today you would lose (0.85) from holding Thunderstruck Resources or give up 17.0% of portfolio value over 90 days.

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

Aston Minerals  vs.  Thunderstruck Resources

Aston Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aston Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Aston Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Thunderstruck Resources

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Aston Minerals and Thunderstruck Resources

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

The idea behind Aston Minerals and Thunderstruck 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.