Correlation Between Tower Resources and Huntsman Exploration

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

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

Diversification Opportunities for Tower Resources and Huntsman Exploration

0.57

Correlation Coefficient

Tower Resources  Huntsman Exploration

Very weak diversification

The 3 months correlation between Tower and Huntsman is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tower Resources and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration and Tower Resources 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 Tower Resources are associated (or correlated) with Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Tower Resources i.e., Tower Resources and Huntsman Exploration go up and down completely randomly.

Pair Corralation between Tower Resources and Huntsman Exploration

Assuming the 90 days horizon Tower Resources is expected to under-perform the Huntsman Exploration. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tower Resources is 2.23 times less risky than Huntsman Exploration. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Huntsman Exploration is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Huntsman Exploration on February 20, 2024 and sell it today you would lose (0.50) from holding Huntsman Exploration or give up 12.5% of portfolio value over 90 days.

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

Tower Resources  vs.  Huntsman Exploration

Tower Resources

Risk-Adjusted Performance

7 of 100

OK

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

Huntsman Exploration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huntsman Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Huntsman Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tower Resources and Huntsman Exploration

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

The idea behind Tower Resources and Huntsman Exploration 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.