Correlation Between Adventus Mining and Pilbara Minerals

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

By analyzing existing cross correlation between Adventus Mining and Pilbara Minerals Limited, you can compare the effects of market volatilities on Adventus Mining and Pilbara Minerals 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 Adventus Mining with a short position of Pilbara Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adventus Mining and Pilbara Minerals.

Diversification Opportunities for Adventus Mining and Pilbara Minerals

0.49

Correlation Coefficient

Adventus Mining  Pilbara Minerals

Very weak diversification

The 3 months correlation between Adventus and Pilbara is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Adventus Mining and Pilbara Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilbara Minerals and Adventus Mining 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 Adventus Mining are associated (or correlated) with Pilbara Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilbara Minerals has no effect on the direction of Adventus Mining i.e., Adventus Mining and Pilbara Minerals go up and down completely randomly.

Pair Corralation between Adventus Mining and Pilbara Minerals

Assuming the 90 days horizon Adventus Mining is expected to generate 1.47 times more return on investment than Pilbara Minerals. However, Adventus Mining is 1.47 times more volatile than Pilbara Minerals Limited. It trades about 0.08 of its potential returns per unit of risk. Pilbara Minerals Limited is currently generating about -0.05 per unit of risk. If you would invest  21.00  in Adventus Mining on October 7, 2024 and sell it today you would earn a total of  11.00  from holding Adventus Mining or generate 52.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.06%
Values	Daily Returns

Adventus Mining  vs.  Pilbara Minerals Limited

Adventus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adventus Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adventus Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pilbara Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Adventus Mining and Pilbara Minerals

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

The idea behind Adventus Mining and Pilbara Minerals 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.