Correlation Between Alien Metals and Thunder Mountain

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

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

Diversification Opportunities for Alien Metals and Thunder Mountain

-0.22

Correlation Coefficient

Alien Metals  Thunder Mountain

Very good diversification

The 3 months correlation between Alien and Thunder is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Thunder Mountain Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Mountain Gold 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 Thunder Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Mountain Gold has no effect on the direction of Alien Metals i.e., Alien Metals and Thunder Mountain go up and down completely randomly.

Pair Corralation between Alien Metals and Thunder Mountain

Assuming the 90 days horizon Alien Metals is expected to generate 3.17 times more return on investment than Thunder Mountain. However, Alien Metals is 3.17 times more volatile than Thunder Mountain Gold. It trades about 0.05 of its potential returns per unit of risk. Thunder Mountain Gold is currently generating about 0.05 per unit of risk. If you would invest  0.11  in Alien Metals on October 10, 2024 and sell it today you would lose (0.09) from holding Alien Metals or give up 81.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Alien Metals  vs.  Thunder Mountain Gold

Alien Metals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 10 (%) 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.

Thunder Mountain Gold

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Alien Metals and Thunder Mountain

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

The idea behind Alien Metals and Thunder Mountain Gold 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.