Correlation Between Aurelia Metals and Whitehaven Coal

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

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

Diversification Opportunities for Aurelia Metals and Whitehaven Coal

0.28

Correlation Coefficient

Aurelia Metals  Whitehaven Coal

Modest diversification

The 3 months correlation between Aurelia and Whitehaven is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Aurelia Metals and Whitehaven Coal

Assuming the 90 days trading horizon Aurelia Metals is expected to generate 2.28 times more return on investment than Whitehaven Coal. However, Aurelia Metals is 2.28 times more volatile than Whitehaven Coal. It trades about 0.0 of its potential returns per unit of risk. Whitehaven Coal is currently generating about -0.04 per unit of risk. If you would invest  19.00  in Aurelia Metals on October 25, 2024 and sell it today you would lose (1.00) from holding Aurelia Metals or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Aurelia Metals  vs.  Whitehaven Coal

Aurelia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurelia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Aurelia Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Whitehaven Coal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aurelia Metals and Whitehaven Coal

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

The idea behind Aurelia Metals and Whitehaven Coal 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..