Correlation Between Australian Vanadium and Altura Mining

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

By analyzing existing cross correlation between Australian Vanadium Limited and Altura Mining Limited, you can compare the effects of market volatilities on Australian Vanadium and Altura Mining 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 Vanadium with a short position of Altura Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Vanadium and Altura Mining.

Diversification Opportunities for Australian Vanadium and Altura Mining

-0.17

Correlation Coefficient

Australian Vanadium  Altura Mining

Good diversification

The 3 months correlation between Australian and Altura is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Australian Vanadium Limited and Altura Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altura Mining Limited and Australian Vanadium 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 Vanadium Limited are associated (or correlated) with Altura Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altura Mining Limited has no effect on the direction of Australian Vanadium i.e., Australian Vanadium and Altura Mining go up and down completely randomly.

Pair Corralation between Australian Vanadium and Altura Mining

Assuming the 90 days horizon Australian Vanadium is expected to generate 8.47 times less return on investment than Altura Mining. But when comparing it to its historical volatility, Australian Vanadium Limited is 4.75 times less risky than Altura Mining. It trades about 0.09 of its potential returns per unit of risk. Altura Mining Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Altura Mining Limited on October 25, 2024 and sell it today you would earn a total of  1.30  from holding Altura Mining Limited or generate 130.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Australian Vanadium Limited  vs.  Altura Mining Limited

Australian Vanadium

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Vanadium Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Australian Vanadium reported solid returns over the last few months and may actually be approaching a breakup point.

Altura Mining Limited

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Australian Vanadium and Altura Mining

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

The idea behind Australian Vanadium Limited and Altura Mining 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.