Correlation Between Zinc One and Ridgestone Mining

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

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

Diversification Opportunities for Zinc One and Ridgestone Mining

0.69

Correlation Coefficient

Zinc One  Ridgestone Mining

Poor diversification

The 3 months correlation between Zinc and Ridgestone is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zinc One Resources and Ridgestone Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgestone Mining and Zinc One 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 Zinc One Resources are associated (or correlated) with Ridgestone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgestone Mining has no effect on the direction of Zinc One i.e., Zinc One and Ridgestone Mining go up and down completely randomly.

Pair Corralation between Zinc One and Ridgestone Mining

Assuming the 90 days horizon Zinc One is expected to generate 56.03 times less return on investment than Ridgestone Mining. But when comparing it to its historical volatility, Zinc One Resources is 2.79 times less risky than Ridgestone Mining. It trades about 0.0 of its potential returns per unit of risk. Ridgestone Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.35  in Ridgestone Mining on August 25, 2024 and sell it today you would lose (0.95) from holding Ridgestone Mining or give up 14.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.45%
Values	Daily Returns

Zinc One Resources  vs.  Ridgestone Mining

Zinc One Resources

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Zinc One Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Zinc One reported solid returns over the last few months and may actually be approaching a breakup point.

Ridgestone Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ridgestone Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Ridgestone Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zinc One and Ridgestone Mining

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

The idea behind Zinc One Resources and Ridgestone Mining 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.