Correlation Between Antofagasta PLC and Adriatic Metals

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

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

Diversification Opportunities for Antofagasta PLC and Adriatic Metals

-0.02

Correlation Coefficient

Antofagasta PLC  Adriatic Metals

Good diversification

The 3 months correlation between Antofagasta and Adriatic is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Antofagasta PLC and Adriatic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals and Antofagasta PLC 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 Antofagasta PLC are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals has no effect on the direction of Antofagasta PLC i.e., Antofagasta PLC and Adriatic Metals go up and down completely randomly.

Pair Corralation between Antofagasta PLC and Adriatic Metals

Assuming the 90 days trading horizon Antofagasta PLC is expected to under-perform the Adriatic Metals. But the stock apears to be less risky and, when comparing its historical volatility, Antofagasta PLC is 1.36 times less risky than Adriatic Metals. The stock trades about -0.04 of its potential returns per unit of risk. The Adriatic Metals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15,220  in Adriatic Metals on September 2, 2024 and sell it today you would earn a total of  5,930  from holding Adriatic Metals or generate 38.96% return on investment over 90 days.

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

Antofagasta PLC  vs.  Adriatic Metals

Antofagasta PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Adriatic Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Antofagasta PLC and Adriatic Metals

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

The idea behind Antofagasta PLC and Adriatic 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 Global Correlations module to find global opportunities by holding instruments from different markets.