Correlation Between INTER CARS and Sovereign Metals

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

By analyzing existing cross correlation between INTER CARS SA and Sovereign Metals Limited, you can compare the effects of market volatilities on INTER CARS and Sovereign 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 INTER CARS with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTER CARS and Sovereign Metals.

Diversification Opportunities for INTER CARS and Sovereign Metals

0.26

Correlation Coefficient

INTER CARS  Sovereign Metals

Modest diversification

The 3 months correlation between INTER and Sovereign is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and INTER CARS 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 INTER CARS SA are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of INTER CARS i.e., INTER CARS and Sovereign Metals go up and down completely randomly.

Pair Corralation between INTER CARS and Sovereign Metals

Assuming the 90 days horizon INTER CARS is expected to generate 3.08 times less return on investment than Sovereign Metals. But when comparing it to its historical volatility, INTER CARS SA is 1.34 times less risky than Sovereign Metals. It trades about 0.08 of its potential returns per unit of risk. Sovereign Metals Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Sovereign Metals Limited on December 22, 2024 and sell it today you would earn a total of  13.00  from holding Sovereign Metals Limited or generate 29.55% return on investment over 90 days.

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

INTER CARS SA  vs.  Sovereign Metals Limited

INTER CARS SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INTER CARS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sovereign Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sovereign Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTER CARS and Sovereign Metals

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

The idea behind INTER CARS SA and Sovereign Metals Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.