Correlation Between BC IRON and Aqua Metals

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

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

Diversification Opportunities for BC IRON and Aqua Metals

0.67

Correlation Coefficient

BC IRON  Aqua Metals

Poor diversification

The 3 months correlation between BC3 and Aqua is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON and Aqua Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Metals and BC IRON 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 BC IRON are associated (or correlated) with Aqua Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Metals has no effect on the direction of BC IRON i.e., BC IRON and Aqua Metals go up and down completely randomly.

Pair Corralation between BC IRON and Aqua Metals

If you would invest (100.00) in Aqua Metals on October 25, 2024 and sell it today you would earn a total of  100.00  from holding Aqua Metals or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

BC IRON  vs.  Aqua Metals

BC IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BC IRON is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BC IRON and Aqua Metals

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

The idea behind BC IRON and Aqua Metals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.