Correlation Between Adriatic Metals and AMP

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

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

Diversification Opportunities for Adriatic Metals and AMP

0.76

Correlation Coefficient

Adriatic Metals  AMP

Poor diversification

The 3 months correlation between Adriatic and AMP is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals Plc and AMP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP and Adriatic 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 Adriatic Metals Plc are associated (or correlated) with AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and AMP go up and down completely randomly.

Pair Corralation between Adriatic Metals and AMP

Assuming the 90 days trading horizon Adriatic Metals Plc is expected to under-perform the AMP. In addition to that, Adriatic Metals is 1.4 times more volatile than AMP. It trades about -0.11 of its total potential returns per unit of risk. AMP is currently generating about 0.16 per unit of volatility. If you would invest  155.00  in AMP on September 20, 2024 and sell it today you would earn a total of  7.00  from holding AMP or generate 4.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Adriatic Metals Plc  vs.  AMP

Adriatic Metals Plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

AMP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AMP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AMP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adriatic Metals and AMP

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

The idea behind Adriatic Metals Plc and AMP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.