Correlation Between American Helium and Centaurus Metals

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

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

Diversification Opportunities for American Helium and Centaurus Metals

-0.61

Correlation Coefficient

American Helium  Centaurus Metals

Excellent diversification

The 3 months correlation between American and Centaurus is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Helium and Centaurus Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and American Helium 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 American Helium are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of American Helium i.e., American Helium and Centaurus Metals go up and down completely randomly.

Pair Corralation between American Helium and Centaurus Metals

Assuming the 90 days horizon American Helium is expected to generate 0.42 times more return on investment than Centaurus Metals. However, American Helium is 2.41 times less risky than Centaurus Metals. It trades about 0.21 of its potential returns per unit of risk. Centaurus Metals Limited is currently generating about -0.09 per unit of risk. If you would invest  10.00  in American Helium on August 31, 2024 and sell it today you would earn a total of  1.00  from holding American Helium or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

American Helium  vs.  Centaurus Metals Limited

American Helium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, American Helium reported solid returns over the last few months and may actually be approaching a breakup point.

Centaurus Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Centaurus Metals may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with American Helium and Centaurus Metals

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

The idea behind American Helium and Centaurus Metals 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.