Correlation Between Matador Mining and Sokoman Minerals

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

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

Diversification Opportunities for Matador Mining and Sokoman Minerals

0.05

Correlation Coefficient

Matador Mining  Sokoman Minerals

Significant diversification

The 3 months correlation between Matador and Sokoman is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Matador Mining Limited and Sokoman Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sokoman Minerals Corp and Matador 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 Matador Mining Limited are associated (or correlated) with Sokoman Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sokoman Minerals Corp has no effect on the direction of Matador Mining i.e., Matador Mining and Sokoman Minerals go up and down completely randomly.

Pair Corralation between Matador Mining and Sokoman Minerals

Assuming the 90 days horizon Matador Mining Limited is expected to generate 2.24 times more return on investment than Sokoman Minerals. However, Matador Mining is 2.24 times more volatile than Sokoman Minerals Corp. It trades about 0.14 of its potential returns per unit of risk. Sokoman Minerals Corp is currently generating about 0.0 per unit of risk. If you would invest  2.00  in Matador Mining Limited on June 22, 2024 and sell it today you would earn a total of  4.48  from holding Matador Mining Limited or generate 224.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.42%
Values	Daily Returns

Matador Mining Limited  vs.  Sokoman Minerals Corp

Matador Mining

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Matador Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile primary indicators, Matador Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Sokoman Minerals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sokoman Minerals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sokoman Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matador Mining and Sokoman Minerals

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

The idea behind Matador Mining Limited and Sokoman Minerals Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.