Correlation Between Australian Strategic and Aurelia Metals

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

Diversification Opportunities for Australian Strategic and Aurelia Metals

-0.1

Correlation Coefficient

Australian Strategic  Aurelia Metals

Good diversification

The 3 months correlation between Australian and Aurelia is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia 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 Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of Australian Strategic i.e., Australian Strategic and Aurelia Metals go up and down completely randomly.

Pair Corralation between Australian Strategic and Aurelia Metals

Assuming the 90 days horizon Australian Strategic Materials is expected to under-perform the Aurelia Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Australian Strategic Materials is 2.34 times less risky than Aurelia Metals. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Aurelia Metals Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7.04  in Aurelia Metals Limited on November 30, 2024 and sell it today you would earn a total of  5.96  from holding Aurelia Metals Limited or generate 84.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Australian Strategic Materials  vs.  Aurelia Metals Limited

Australian Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Australian Strategic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aurelia Metals

Risk-Adjusted Performance

Good

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

Pair Trading with Australian Strategic and Aurelia Metals

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

The idea behind Australian Strategic Materials and Aurelia Metals Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.