Correlation Between Aurelia Metals and Gensource Potash

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

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

Diversification Opportunities for Aurelia Metals and Gensource Potash

0.46

Correlation Coefficient

Aurelia Metals  Gensource Potash

Very weak diversification

The 3 months correlation between Aurelia and Gensource is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals Limited and Gensource Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gensource Potash and Aurelia Metals 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 Aurelia Metals Limited are associated (or correlated) with Gensource Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gensource Potash has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Gensource Potash go up and down completely randomly.

Pair Corralation between Aurelia Metals and Gensource Potash

Assuming the 90 days horizon Aurelia Metals Limited is expected to under-perform the Gensource Potash. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aurelia Metals Limited is 4.11 times less risky than Gensource Potash. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Gensource Potash is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Gensource Potash on September 12, 2024 and sell it today you would lose (2.00) from holding Gensource Potash or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Aurelia Metals Limited  vs.  Gensource Potash

Aurelia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurelia Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Gensource Potash

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Aurelia Metals and Gensource Potash

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

The idea behind Aurelia Metals Limited and Gensource Potash 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.