Correlation Between Indutrade and Future Metals

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

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

Diversification Opportunities for Indutrade and Future Metals

-0.35

Correlation Coefficient

Indutrade  Future Metals

Very good diversification

The 3 months correlation between Indutrade and Future is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL and Indutrade 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 Indutrade AB are associated (or correlated) with Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Indutrade i.e., Indutrade and Future Metals go up and down completely randomly.

Pair Corralation between Indutrade and Future Metals

Assuming the 90 days trading horizon Indutrade AB is expected to under-perform the Future Metals. But the stock apears to be less risky and, when comparing its historical volatility, Indutrade AB is 2.06 times less risky than Future Metals. The stock trades about -0.16 of its potential returns per unit of risk. The Future Metals NL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Future Metals NL on September 2, 2024 and sell it today you would earn a total of  5.00  from holding Future Metals NL or generate 5.56% return on investment over 90 days.

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

Indutrade AB  vs.  Future Metals NL

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Future Metals NL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Future Metals NL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Future Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indutrade and Future Metals

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

The idea behind Indutrade AB and Future Metals NL 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.