Correlation Between Transition Metals and Wolfden Resources

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

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

Diversification Opportunities for Transition Metals and Wolfden Resources

-0.21

Correlation Coefficient

Transition Metals  Wolfden Resources

Very good diversification

The 3 months correlation between Transition and Wolfden is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Transition Metals Corp and Wolfden Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfden Resources and Transition 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 Transition Metals Corp are associated (or correlated) with Wolfden Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfden Resources has no effect on the direction of Transition Metals i.e., Transition Metals and Wolfden Resources go up and down completely randomly.

Pair Corralation between Transition Metals and Wolfden Resources

Assuming the 90 days horizon Transition Metals Corp is expected to under-perform the Wolfden Resources. But the stock apears to be less risky and, when comparing its historical volatility, Transition Metals Corp is 3.98 times less risky than Wolfden Resources. The stock trades about 0.0 of its potential returns per unit of risk. The Wolfden Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Wolfden Resources on September 22, 2024 and sell it today you would earn a total of  0.50  from holding Wolfden Resources or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Transition Metals Corp  vs.  Wolfden Resources

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transition Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Transition Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wolfden Resources

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Transition Metals and Wolfden Resources

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

The idea behind Transition Metals Corp and Wolfden 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.