Correlation Between Australian Vanadium and Decade Resources

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

Diversification Opportunities for Australian Vanadium and Decade Resources

-0.23

Correlation Coefficient

Australian Vanadium  Decade Resources

Very good diversification

The 3 months correlation between Australian and Decade is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Australian Vanadium Limited and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade Resources 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 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 Vanadium i.e., Australian Vanadium and Decade Resources go up and down completely randomly.

Pair Corralation between Australian Vanadium and Decade Resources

Assuming the 90 days horizon Australian Vanadium Limited is expected to generate 3.02 times more return on investment than Decade Resources. However, Australian Vanadium is 3.02 times more volatile than Decade Resources. It trades about 0.07 of its potential returns per unit of risk. Decade Resources is currently generating about -0.14 per unit of risk. If you would invest  0.86  in Australian Vanadium Limited on October 7, 2024 and sell it today you would lose (0.10) from holding Australian Vanadium Limited or give up 11.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Australian Vanadium Limited  vs.  Decade Resources

Australian Vanadium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Vanadium Limited are ranked lower than 3 (%) 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.

Decade Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decade Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Decade Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Australian Vanadium and Decade Resources

The main advantage of trading using opposite Australian Vanadium and Decade Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Vanadium 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 Vanadium Limited 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.