Correlation Between Aurelia Metals and Emetals

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

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

Diversification Opportunities for Aurelia Metals and Emetals

-0.31

Correlation Coefficient

Aurelia Metals  Emetals

Very good diversification

The 3 months correlation between Aurelia and Emetals is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals and Emetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emetals and Aurelia 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 Aurelia Metals are associated (or correlated) with Emetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emetals has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Emetals go up and down completely randomly.

Pair Corralation between Aurelia Metals and Emetals

Assuming the 90 days trading horizon Aurelia Metals is expected to generate 2.37 times less return on investment than Emetals. But when comparing it to its historical volatility, Aurelia Metals is 1.01 times less risky than Emetals. It trades about 0.04 of its potential returns per unit of risk. Emetals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Emetals on September 17, 2024 and sell it today you would earn a total of  0.10  from holding Emetals or generate 25.0% return on investment over 90 days.

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

Aurelia Metals  vs.  Emetals

Aurelia Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Aurelia Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Emetals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emetals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Emetals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurelia Metals and Emetals

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

The idea behind Aurelia Metals and Emetals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.