Correlation Between Advanced Braking and Cyclone Metals

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

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

Diversification Opportunities for Advanced Braking and Cyclone Metals

0.28

Correlation Coefficient

Advanced Braking  Cyclone Metals

Modest diversification

The 3 months correlation between Advanced and Cyclone is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Cyclone Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclone Metals and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Cyclone Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclone Metals has no effect on the direction of Advanced Braking i.e., Advanced Braking and Cyclone Metals go up and down completely randomly.

Pair Corralation between Advanced Braking and Cyclone Metals

Assuming the 90 days trading horizon Advanced Braking is expected to generate 28.93 times less return on investment than Cyclone Metals. But when comparing it to its historical volatility, Advanced Braking Technology is 4.89 times less risky than Cyclone Metals. It trades about 0.03 of its potential returns per unit of risk. Cyclone Metals Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Cyclone Metals Limited on September 22, 2024 and sell it today you would earn a total of  2.80  from holding Cyclone Metals Limited or generate 140.0% return on investment over 90 days.

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

Advanced Braking Technology  vs.  Cyclone Metals Limited

Advanced Braking Tec

Risk-Adjusted Performance

3 of 100

Insignificant

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

Cyclone Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cyclone Metals Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Cyclone Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Braking and Cyclone Metals

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

The idea behind Advanced Braking Technology and Cyclone 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.