Correlation Between NEW PACIFIC and COMPUTERSHARE

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

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

Diversification Opportunities for NEW PACIFIC and COMPUTERSHARE

-0.29

Correlation Coefficient

NEW PACIFIC  COMPUTERSHARE

Very good diversification

The 3 months correlation between NEW and COMPUTERSHARE is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NEW PACIFIC METALS and COMPUTERSHARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTERSHARE and NEW PACIFIC 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 NEW PACIFIC METALS are associated (or correlated) with COMPUTERSHARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTERSHARE has no effect on the direction of NEW PACIFIC i.e., NEW PACIFIC and COMPUTERSHARE go up and down completely randomly.

Pair Corralation between NEW PACIFIC and COMPUTERSHARE

Assuming the 90 days trading horizon NEW PACIFIC METALS is expected to under-perform the COMPUTERSHARE. In addition to that, NEW PACIFIC is 4.08 times more volatile than COMPUTERSHARE. It trades about -0.05 of its total potential returns per unit of risk. COMPUTERSHARE is currently generating about 0.33 per unit of volatility. If you would invest  1,680  in COMPUTERSHARE on October 7, 2024 and sell it today you would earn a total of  400.00  from holding COMPUTERSHARE or generate 23.81% return on investment over 90 days.

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

NEW PACIFIC METALS  vs.  COMPUTERSHARE

NEW PACIFIC METALS

Risk-Adjusted Performance

0 of 100

Very Weak

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

COMPUTERSHARE

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, COMPUTERSHARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW PACIFIC and COMPUTERSHARE

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

The idea behind NEW PACIFIC METALS and COMPUTERSHARE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.