Correlation Between Centamin PLC and Future Metals

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

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

Diversification Opportunities for Centamin PLC and Future Metals

0.68

Correlation Coefficient

Centamin PLC  Future Metals

Poor diversification

The 3 months correlation between Centamin and Future is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Centamin PLC and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL and Centamin PLC 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 Centamin PLC are associated (or correlated) with Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Centamin PLC i.e., Centamin PLC and Future Metals go up and down completely randomly.

Pair Corralation between Centamin PLC and Future Metals

Assuming the 90 days trading horizon Centamin PLC is expected to generate 0.82 times more return on investment than Future Metals. However, Centamin PLC is 1.21 times less risky than Future Metals. It trades about -0.11 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.31 per unit of risk. If you would invest  15,250  in Centamin PLC on September 3, 2024 and sell it today you would lose (650.00) from holding Centamin PLC or give up 4.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

Centamin PLC  vs.  Future Metals NL

Centamin PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centamin PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Centamin PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Future Metals NL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Future Metals NL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Future Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centamin PLC and Future Metals

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

The idea behind Centamin PLC and Future Metals NL 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.