Correlation Between Largo Resources and Cabot

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

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

Diversification Opportunities for Largo Resources and Cabot

0.19

Correlation Coefficient

Largo Resources  Cabot

Average diversification

The 3 months correlation between Largo and Cabot is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Largo Resources and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot and Largo 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 Largo Resources are associated (or correlated) with Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Largo Resources i.e., Largo Resources and Cabot go up and down completely randomly.

Pair Corralation between Largo Resources and Cabot

Considering the 90-day investment horizon Largo Resources is expected to under-perform the Cabot. In addition to that, Largo Resources is 2.75 times more volatile than Cabot. It trades about -0.02 of its total potential returns per unit of risk. Cabot is currently generating about 0.01 per unit of volatility. If you would invest  7,204  in Cabot on May 6, 2025 and sell it today you would lose (4.00) from holding Cabot or give up 0.06% of portfolio value over 90 days.

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

Largo Resources  vs.  Cabot

Largo Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Largo Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Largo Resources is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Cabot is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Largo Resources and Cabot

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

The idea behind Largo Resources and Cabot 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.