Correlation Between Alien Metals and Compania

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

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

Diversification Opportunities for Alien Metals and Compania

0.55

Correlation Coefficient

Alien Metals  Compania

Very weak diversification

The 3 months correlation between Alien and Compania is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and Alien 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 Alien Metals are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Alien Metals i.e., Alien Metals and Compania go up and down completely randomly.

Pair Corralation between Alien Metals and Compania

Assuming the 90 days horizon Alien Metals is expected to generate 42.46 times more return on investment than Compania. However, Alien Metals is 42.46 times more volatile than Compania de Minas. It trades about 0.16 of its potential returns per unit of risk. Compania de Minas is currently generating about 0.05 per unit of risk. If you would invest  0.16  in Alien Metals on September 28, 2024 and sell it today you would earn a total of  0.07  from holding Alien Metals or generate 43.75% return on investment over 90 days.

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

Alien Metals  vs.  Compania de Minas

Alien Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alien Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alien Metals and Compania

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

The idea behind Alien Metals and Compania de Minas 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.