Correlation Between Aurania Resources and Metallic Minerals

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

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

Diversification Opportunities for Aurania Resources and Metallic Minerals

0.16

Correlation Coefficient

Aurania Resources  Metallic Minerals

Average diversification

The 3 months correlation between Aurania and Metallic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aurania Resources and Metallic Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metallic Minerals Corp and Aurania 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 Aurania Resources are associated (or correlated) with Metallic Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metallic Minerals Corp has no effect on the direction of Aurania Resources i.e., Aurania Resources and Metallic Minerals go up and down completely randomly.

Pair Corralation between Aurania Resources and Metallic Minerals

Assuming the 90 days horizon Aurania Resources is expected to generate 15.52 times less return on investment than Metallic Minerals. In addition to that, Aurania Resources is 1.29 times more volatile than Metallic Minerals Corp. It trades about 0.01 of its total potential returns per unit of risk. Metallic Minerals Corp is currently generating about 0.19 per unit of volatility. If you would invest  9.37  in Metallic Minerals Corp on December 30, 2024 and sell it today you would earn a total of  7.63  from holding Metallic Minerals Corp or generate 81.43% return on investment over 90 days.

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

Aurania Resources  vs.  Metallic Minerals Corp

Aurania Resources

Risk-Adjusted Performance

Very Weak

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

Metallic Minerals Corp

Risk-Adjusted Performance

Good

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

Pair Trading with Aurania Resources and Metallic Minerals

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

The idea behind Aurania Resources and Metallic Minerals Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.