Correlation Between Austral Gold and Brixton Metals

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

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

Diversification Opportunities for Austral Gold and Brixton Metals

0.55

Correlation Coefficient

Austral Gold  Brixton Metals

Very weak diversification

The 3 months correlation between Austral and Brixton is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Austral Gold Limited and Brixton Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brixton Metals and Austral Gold 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 Austral Gold Limited are associated (or correlated) with Brixton Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brixton Metals has no effect on the direction of Austral Gold i.e., Austral Gold and Brixton Metals go up and down completely randomly.

Pair Corralation between Austral Gold and Brixton Metals

Assuming the 90 days horizon Austral Gold is expected to generate 3.68 times less return on investment than Brixton Metals. But when comparing it to its historical volatility, Austral Gold Limited is 1.95 times less risky than Brixton Metals. It trades about 0.22 of its potential returns per unit of risk. Brixton Metals is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Brixton Metals on December 4, 2024 and sell it today you would earn a total of  2.50  from holding Brixton Metals or generate 55.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Austral Gold Limited  vs.  Brixton Metals

Austral Gold Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Brixton Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brixton Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brixton Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austral Gold and Brixton Metals

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

The idea behind Austral Gold Limited and Brixton Metals 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.