Correlation Between Avarone Metals and Chalice Mining

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

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

Diversification Opportunities for Avarone Metals and Chalice Mining

0.24

Correlation Coefficient

Avarone Metals  Chalice Mining

Modest diversification

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

Pair Corralation between Avarone Metals and Chalice Mining

Assuming the 90 days horizon Avarone Metals is expected to under-perform the Chalice Mining. In addition to that, Avarone Metals is 1.62 times more volatile than Chalice Mining Limited. It trades about -0.13 of its total potential returns per unit of risk. Chalice Mining Limited is currently generating about 0.11 per unit of volatility. If you would invest  67.00  in Chalice Mining Limited on September 5, 2024 and sell it today you would earn a total of  25.00  from holding Chalice Mining Limited or generate 37.31% return on investment over 90 days.

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

Avarone Metals  vs.  Chalice Mining Limited

Avarone Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avarone Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal 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.

Chalice Mining

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chalice Mining Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Chalice Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avarone Metals and Chalice Mining

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

The idea behind Avarone Metals and Chalice Mining Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.