Correlation Between Auction Technology and Technology Minerals

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

By analyzing existing cross correlation between Auction Technology Group and Technology Minerals PLC, you can compare the effects of market volatilities on Auction Technology and Technology Minerals 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 Auction Technology with a short position of Technology Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auction Technology and Technology Minerals.

Diversification Opportunities for Auction Technology and Technology Minerals

0.41

Correlation Coefficient

Auction Technology  Technology Minerals

Very weak diversification

The 3 months correlation between Auction and Technology is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Auction Technology Group and Technology Minerals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Minerals PLC and Auction Technology 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 Auction Technology Group are associated (or correlated) with Technology Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Minerals PLC has no effect on the direction of Auction Technology i.e., Auction Technology and Technology Minerals go up and down completely randomly.

Pair Corralation between Auction Technology and Technology Minerals

Assuming the 90 days trading horizon Auction Technology Group is expected to under-perform the Technology Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Auction Technology Group is 25.03 times less risky than Technology Minerals. The stock trades about -0.07 of its potential returns per unit of risk. The Technology Minerals PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Technology Minerals PLC on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Technology Minerals PLC or generate 36.36% return on investment over 90 days.

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

Auction Technology Group  vs.  Technology Minerals PLC

Auction Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Technology Minerals PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Minerals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Technology Minerals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auction Technology and Technology Minerals

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

The idea behind Auction Technology Group and Technology Minerals PLC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.