Correlation Between Avarone Metals and Sumitomo Metal

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

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

Diversification Opportunities for Avarone Metals and Sumitomo Metal

0.0

Correlation Coefficient

Avarone Metals  Sumitomo Metal

Pay attention - limited upside

The 3 months correlation between Avarone and Sumitomo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal 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 Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Avarone Metals i.e., Avarone Metals and Sumitomo Metal go up and down completely randomly.

Pair Corralation between Avarone Metals and Sumitomo Metal

If you would invest  0.33  in Avarone Metals on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Avarone Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Avarone Metals  vs.  Sumitomo Metal Mining

Avarone Metals

Risk-Adjusted Performance

Very Weak

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

Sumitomo Metal Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sumitomo Metal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Avarone Metals and Sumitomo Metal

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

The idea behind Avarone Metals and Sumitomo Metal Mining 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.