Correlation Between Compania and Metalla Royalty

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

By analyzing existing cross correlation between Compania de Minas and Metalla Royalty Streaming, you can compare the effects of market volatilities on Compania and Metalla Royalty 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 Compania with a short position of Metalla Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Metalla Royalty.

Diversification Opportunities for Compania and Metalla Royalty

0.53

Correlation Coefficient

Compania  Metalla Royalty

Very weak diversification

The 3 months correlation between Compania and Metalla is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Metalla Royalty Streaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalla Royalty Streaming and Compania 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 Compania de Minas are associated (or correlated) with Metalla Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalla Royalty Streaming has no effect on the direction of Compania i.e., Compania and Metalla Royalty go up and down completely randomly.

Pair Corralation between Compania and Metalla Royalty

Considering the 90-day investment horizon Compania is expected to generate 3.26 times less return on investment than Metalla Royalty. But when comparing it to its historical volatility, Compania de Minas is 1.56 times less risky than Metalla Royalty. It trades about 0.03 of its potential returns per unit of risk. Metalla Royalty Streaming is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  276.00  in Metalla Royalty Streaming on September 2, 2024 and sell it today you would earn a total of  31.00  from holding Metalla Royalty Streaming or generate 11.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Compania de Minas  vs.  Metalla Royalty Streaming

Compania de Minas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Metalla Royalty Streaming

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metalla Royalty Streaming are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Metalla Royalty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Metalla Royalty

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

The idea behind Compania de Minas and Metalla Royalty Streaming 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.