Correlation Between Aurelia Metals and Predictive Discovery

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

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

Diversification Opportunities for Aurelia Metals and Predictive Discovery

0.62

Correlation Coefficient

Aurelia Metals  Predictive Discovery

Poor diversification

The 3 months correlation between Aurelia and Predictive is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals and Predictive Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery 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 Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Predictive Discovery go up and down completely randomly.

Pair Corralation between Aurelia Metals and Predictive Discovery

Assuming the 90 days trading horizon Aurelia Metals is expected to generate 1.33 times less return on investment than Predictive Discovery. But when comparing it to its historical volatility, Aurelia Metals is 1.01 times less risky than Predictive Discovery. It trades about 0.25 of its potential returns per unit of risk. Predictive Discovery is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Predictive Discovery on November 19, 2024 and sell it today you would earn a total of  8.00  from holding Predictive Discovery or generate 29.63% return on investment over 90 days.

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

Aurelia Metals  vs.  Predictive Discovery

Aurelia Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aurelia Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Predictive Discovery

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Predictive Discovery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Predictive Discovery unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurelia Metals and Predictive Discovery

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

The idea behind Aurelia Metals and Predictive Discovery 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.