Correlation Between Australian Strategic and ACDC Metals

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

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

Diversification Opportunities for Australian Strategic and ACDC Metals

0.4

Correlation Coefficient

Australian Strategic  ACDC Metals

Very weak diversification

The 3 months correlation between Australian and ACDC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals and Australian Strategic 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 Australian Strategic Materials are associated (or correlated) with ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Australian Strategic i.e., Australian Strategic and ACDC Metals go up and down completely randomly.

Pair Corralation between Australian Strategic and ACDC Metals

Assuming the 90 days trading horizon Australian Strategic Materials is expected to generate 0.49 times more return on investment than ACDC Metals. However, Australian Strategic Materials is 2.03 times less risky than ACDC Metals. It trades about 0.13 of its potential returns per unit of risk. ACDC Metals is currently generating about 0.03 per unit of risk. If you would invest  50.00  in Australian Strategic Materials on October 5, 2024 and sell it today you would earn a total of  3.00  from holding Australian Strategic Materials or generate 6.0% return on investment over 90 days.

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

Australian Strategic Materials  vs.  ACDC Metals

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

ACDC Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACDC Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, ACDC Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Australian Strategic and ACDC Metals

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

The idea behind Australian Strategic Materials and ACDC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.