Correlation Between Durango Resources and Adriatic Metals

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

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

Diversification Opportunities for Durango Resources and Adriatic Metals

0.75

Correlation Coefficient

Durango Resources  Adriatic Metals

Poor diversification

The 3 months correlation between Durango and Adriatic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Durango Resources and Adriatic Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals PLC and Durango Resources 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 Durango Resources are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals PLC has no effect on the direction of Durango Resources i.e., Durango Resources and Adriatic Metals go up and down completely randomly.

Pair Corralation between Durango Resources and Adriatic Metals

Assuming the 90 days horizon Durango Resources is expected to generate 5.73 times more return on investment than Adriatic Metals. However, Durango Resources is 5.73 times more volatile than Adriatic Metals PLC. It trades about 0.18 of its potential returns per unit of risk. Adriatic Metals PLC is currently generating about 0.1 per unit of risk. If you would invest  3.01  in Durango Resources on December 27, 2024 and sell it today you would earn a total of  6.14  from holding Durango Resources or generate 203.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Durango Resources  vs.  Adriatic Metals PLC

Durango Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Durango Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Durango Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Adriatic Metals PLC

Risk-Adjusted Performance

OK

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

Pair Trading with Durango Resources and Adriatic Metals

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

The idea behind Durango Resources and Adriatic Metals 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.