Correlation Between Adriatic Metals and American Helium

Can any of the company-specific risk be diversified away by investing in both Adriatic Metals and American Helium 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 American Helium 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 American Helium, you can compare the effects of market volatilities on Adriatic Metals and American Helium 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 American Helium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and American Helium.

Diversification Opportunities for Adriatic Metals and American Helium

0.21

Correlation Coefficient

Adriatic Metals  American Helium

Modest diversification

The 3 months correlation between Adriatic and American is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and American Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Helium 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 American Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Helium has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and American Helium go up and down completely randomly.

Pair Corralation between Adriatic Metals and American Helium

Assuming the 90 days horizon Adriatic Metals is expected to generate 1.52 times less return on investment than American Helium. But when comparing it to its historical volatility, Adriatic Metals PLC is 1.03 times less risky than American Helium. It trades about 0.04 of its potential returns per unit of risk. American Helium is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11.00  in American Helium on November 20, 2024 and sell it today you would earn a total of  1.00  from holding American Helium or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Adriatic Metals PLC  vs.  American Helium

Adriatic Metals PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals may actually be approaching a critical reversion point that can send shares even higher in March 2025.

American Helium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, American Helium may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Adriatic Metals and American Helium

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

The idea behind Adriatic Metals PLC and American Helium 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.