Correlation Between Aurelia Metals and Australian Strategic

Can any of the company-specific risk be diversified away by investing in both Aurelia Metals and Australian Strategic 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 Australian Strategic 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 Australian Strategic Materials, you can compare the effects of market volatilities on Aurelia Metals and Australian Strategic 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 Australian Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurelia Metals and Australian Strategic.

Diversification Opportunities for Aurelia Metals and Australian Strategic

0.24

Correlation Coefficient

Aurelia Metals  Australian Strategic

Modest diversification

The 3 months correlation between Aurelia and Australian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals Limited and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic 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 Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Australian Strategic go up and down completely randomly.

Pair Corralation between Aurelia Metals and Australian Strategic

Assuming the 90 days horizon Aurelia Metals Limited is expected to generate 0.73 times more return on investment than Australian Strategic. However, Aurelia Metals Limited is 1.37 times less risky than Australian Strategic. It trades about 0.02 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.01 per unit of risk. If you would invest  15.00  in Aurelia Metals Limited on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Aurelia Metals Limited or generate 0.0% return on investment over 90 days.

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

Aurelia Metals Limited  vs.  Australian Strategic Materials

Aurelia Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aurelia Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aurelia Metals and Australian Strategic

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

The idea behind Aurelia Metals Limited and Australian Strategic Materials 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 Transaction History module to view history of all your transactions and understand their impact on performance.