Correlation Between Aurelia Metals and Defense Metals

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

Diversification Opportunities for Aurelia Metals and Defense Metals

-0.06

Correlation Coefficient

Aurelia Metals  Defense Metals

Good diversification

The 3 months correlation between Aurelia and Defense is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals Limited and Defense Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense Metals Corp 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 Defense Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense Metals Corp has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Defense Metals go up and down completely randomly.

Pair Corralation between Aurelia Metals and Defense Metals

Assuming the 90 days horizon Aurelia Metals Limited is expected to generate 0.16 times more return on investment than Defense Metals. However, Aurelia Metals Limited is 6.27 times less risky than Defense Metals. It trades about 0.12 of its potential returns per unit of risk. Defense Metals Corp is currently generating about -0.03 per unit of risk. If you would invest  12.00  in Aurelia Metals Limited on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Aurelia Metals Limited or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Aurelia Metals Limited  vs.  Defense Metals Corp

Aurelia Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurelia Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Defense Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defense Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aurelia Metals and Defense Metals

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

The idea behind Aurelia Metals Limited and Defense Metals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.