Correlation Between ACDC Metals and Coles

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

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

Diversification Opportunities for ACDC Metals and Coles

-0.52

Correlation Coefficient

ACDC Metals  Coles

Excellent diversification

The 3 months correlation between ACDC and Coles is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding ACDC Metals and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group and ACDC Metals 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 ACDC Metals are associated (or correlated) with Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of ACDC Metals i.e., ACDC Metals and Coles go up and down completely randomly.

Pair Corralation between ACDC Metals and Coles

Assuming the 90 days trading horizon ACDC Metals is expected to generate 5.05 times more return on investment than Coles. However, ACDC Metals is 5.05 times more volatile than Coles Group. It trades about 0.06 of its potential returns per unit of risk. Coles Group is currently generating about -0.02 per unit of risk. If you would invest  5.20  in ACDC Metals on September 14, 2024 and sell it today you would earn a total of  0.70  from holding ACDC Metals or generate 13.46% return on investment over 90 days.

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

ACDC Metals  vs.  Coles Group

ACDC Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ACDC Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, ACDC Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coles Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ACDC Metals and Coles

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

The idea behind ACDC Metals and Coles Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.