Correlation Between Alien Metals and Clean Air

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

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

Diversification Opportunities for Alien Metals and Clean Air

0.26

Correlation Coefficient

Alien Metals  Clean Air

Modest diversification

The 3 months correlation between Alien and Clean is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals 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 Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of Alien Metals i.e., Alien Metals and Clean Air go up and down completely randomly.

Pair Corralation between Alien Metals and Clean Air

Assuming the 90 days horizon Alien Metals is expected to generate 15.33 times more return on investment than Clean Air. However, Alien Metals is 15.33 times more volatile than Clean Air Metals. It trades about 0.16 of its potential returns per unit of risk. Clean Air Metals is currently generating about 0.04 per unit of risk. If you would invest  0.40  in Alien Metals on September 2, 2024 and sell it today you would lose (0.31) from holding Alien Metals or give up 77.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Alien Metals  vs.  Clean Air Metals

Alien Metals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alien Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Clean Air Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Air Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Clean Air reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alien Metals and Clean Air

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

The idea behind Alien Metals and Clean Air 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.