Correlation Between Aurelia Metals and Snow Lake

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

Diversification Opportunities for Aurelia Metals and Snow Lake

0.36

Correlation Coefficient

Aurelia Metals  Snow Lake

Weak diversification

The 3 months correlation between Aurelia and Snow is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals Limited and Snow Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Lake Resources 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 Snow Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Lake Resources has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Snow Lake go up and down completely randomly.

Pair Corralation between Aurelia Metals and Snow Lake

Assuming the 90 days horizon Aurelia Metals is expected to generate 16.21 times less return on investment than Snow Lake. But when comparing it to its historical volatility, Aurelia Metals Limited is 4.44 times less risky than Snow Lake. It trades about 0.04 of its potential returns per unit of risk. Snow Lake Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Snow Lake Resources on November 29, 2024 and sell it today you would earn a total of  22.00  from holding Snow Lake Resources or generate 110.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Aurelia Metals Limited  vs.  Snow Lake Resources

Aurelia Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurelia Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Snow Lake Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snow Lake Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Snow Lake displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurelia Metals and Snow Lake

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

The idea behind Aurelia Metals Limited and Snow Lake 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.