Correlation Between Australian Strategic and Centrex Metals

Can any of the company-specific risk be diversified away by investing in both Australian Strategic and Centrex 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 Centrex 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 Centrex Metals, you can compare the effects of market volatilities on Australian Strategic and Centrex 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 Centrex Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Strategic and Centrex Metals.

Diversification Opportunities for Australian Strategic and Centrex Metals

0.82

Correlation Coefficient

Australian Strategic  Centrex Metals

Very poor diversification

The 3 months correlation between Australian and Centrex is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Centrex Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrex 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 Centrex Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrex Metals has no effect on the direction of Australian Strategic i.e., Australian Strategic and Centrex Metals go up and down completely randomly.

Pair Corralation between Australian Strategic and Centrex Metals

Assuming the 90 days trading horizon Australian Strategic Materials is expected to generate 0.76 times more return on investment than Centrex Metals. However, Australian Strategic Materials is 1.32 times less risky than Centrex Metals. It trades about 0.13 of its potential returns per unit of risk. Centrex Metals is currently generating about -0.22 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	Strong
Accuracy	100.0%
Values	Daily Returns

Australian Strategic Materials  vs.  Centrex 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.

Centrex Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrex Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Australian Strategic and Centrex Metals

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

The idea behind Australian Strategic Materials and Centrex 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.