Correlation Between Adriatic Metals and Magna Mining

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

Diversification Opportunities for Adriatic Metals and Magna Mining

0.64

Correlation Coefficient

Adriatic Metals  Magna Mining

Poor diversification

The 3 months correlation between Adriatic and Magna is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and Magna Mining go up and down completely randomly.

Pair Corralation between Adriatic Metals and Magna Mining

Assuming the 90 days horizon Adriatic Metals is expected to generate 1.9 times less return on investment than Magna Mining. But when comparing it to its historical volatility, Adriatic Metals PLC is 1.39 times less risky than Magna Mining. It trades about 0.13 of its potential returns per unit of risk. Magna Mining is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Magna Mining on September 4, 2024 and sell it today you would earn a total of  41.00  from holding Magna Mining or generate 67.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Adriatic Metals PLC  vs.  Magna Mining

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. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Magna Mining

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Adriatic Metals and Magna Mining

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

The idea behind Adriatic Metals PLC and Magna Mining 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.