Correlation Between Australian Strategic and Decade Resources

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

Diversification Opportunities for Australian Strategic and Decade Resources

-0.02

Correlation Coefficient

Australian Strategic  Decade Resources

Good diversification

The 3 months correlation between Australian and Decade is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade Resources 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 Decade Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decade Resources has no effect on the direction of Australian Strategic i.e., Australian Strategic and Decade Resources go up and down completely randomly.

Pair Corralation between Australian Strategic and Decade Resources

Assuming the 90 days horizon Australian Strategic Materials is expected to under-perform the Decade Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Australian Strategic Materials is 4.01 times less risky than Decade Resources. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Decade Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.58  in Decade Resources on December 30, 2024 and sell it today you would earn a total of  0.87  from holding Decade Resources or generate 55.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Australian Strategic Materials  vs.  Decade Resources

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Decade Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Decade Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Decade Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Strategic and Decade Resources

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

The idea behind Australian Strategic Materials and Decade Resources 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.